VINOD L. GADHIYA, MUMBAI V. DCIT CC5(3), MUMBAI

ITA 2785/MUM/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 6257 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Assessment Year: 2011-2012
• Appeal Filed On: 03-05-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PRATAP SINGH
• Assessee Lawyers: SANJAY N KAPADIAAR
• Keywords: Unexplained cash credit; Unexplained investment; Income from undisclosed sources; Share purchase agreement; Principle of natural justice; Opportunity of cross examination; Transactions in derivatives; Question of law; Tangible material; Wrong claim; Corroborative evidences; Third party statement; Accommodation entries; Scheme of amalgamation; Onus to prove; Sham transactions; Penny stocks; Set aside; Audi alteram partem; Capital Gains
• Section: 69C; 143(3); 133A; 153A; 260A; 191; 64; 43; 48; 73; 72; 13; 22; 131; 68; 69; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B, BENCH MUM BAI BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER & SHRI AMARJIT SINGH, JUDICIAL MEMBER ITA NOS.2785 TO 2788/MUM/2019 ( ASSESSMENT YEARS: 2011-12,2012-13,2014-15 & 2016-17 ) SHRI VINOD L. GADHIYA 701, MILLENNIUM APT, LALLUBHAI PARK, EXTN.ROAD VILE PARLE(W) MUMBAI-400 056 VS. DCIT,CC-5(3) ROOM NO.1906 AIR INDIA BUILDING NARIMAN POINT MUMBAI-400 021 PAN/GIR NO.AASPP8898F ( APPELLANT ) .. ( RESP ONDENT ) ITA NOS.2797 TO 2799/MUM/2019 ( ASSESSMENT YEARS: 2011-12,2012-13 & 2015-16 ) SMT. BHAVNA V.GADHIYA 701, MILLENNIUM APT, LALLUBHAI PARK, EXTN.ROAD VILE PARLE(W) MUMBAI-400 056 VS. DCIT,CC-5(3) ROOM NO.1906 AIR INDIA BUILDING NARIMAN POINT MUMBAI-400 021 PAN/GIR NO. AGPPG6724L ( APPELLANT ) .. ( RESPONDENT ) ITA NO.2804/MUM/2019 ( ASSESSMENT YEAR: 2015-16 ) SHRI DIVYESH V.GADHIYA 701, MILLENNIUM APT, LALLUBHAI PARK, EXTN.ROAD VILE PARLE(W) MUMBAI-400 056 VS. DCIT,CC-5(3) ROOM NO.1906 AIR INDIA BUILDING NARIMAN POINT MUMBAI-400 021 PAN/GIR NO. BECPG4917B ( APPELLANT ) .. ( RESPONDENT ) ITA NO.2780/MUM/2019 ( ASSESSMENT YEAR: 2014-15 ) SHRI VINOD L. GADHIYA HUF 701, MILLENNIUM APT, LALLUBHAI PARK, EXTN.ROAD VILE PARLE(W) MUMBAI-400 056 VS. DCIT,CC-5(3) ROOM NO.1906 AIR INDIA BUILDING NARIMAN POINT MUMBAI-400 021 PAN/GIR NO. A A GHV9719P ( APPELLANT ) .. ( RESPONDENT ) ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 2 ITA NOS.2793 TO 2796/MUM/2019 ( ASSESSMENT YEAR: 2011-12,2012-13,2014-15&2015-16 ) SHRI BHARAT L. GADHIYA 701, MILLENNIUM APT, LALLUBHAI PARK, EXTN.ROAD VILE PARLE(W) MUMBAI-400 056 VS. DCIT,CC-5(3) ROOM NO.1906 AIR INDIA BUILDING NARIMAN POINT MUMBAI-400 021 PAN/GIR NO.AAKPG0296 J (APPELLANT ) .. ( RESPONDENT ) ITA NOS.2813 TO 2816/MUM/2019 ( ASSESSMENT YEAR: 2011-12,2012-13,2014-15 & 2015-16) SHRI BIPIN L.GADHIYA 701, MILLENNIUM APT, LALLUBHAI PARK, EXTN.ROAD VILE PARLE(W) MUMBAI-400 056 VS. DCIT,CC-5(3) ROOM NO.1906 AIR INDIA BUILDING NARIMAN POINT MUMBAI-400 021 PAN/GIR NO.AAKPG0295M ( APPELLANT ) .. ( RESPO NDENT ) ITA NOS.2805 TO 2808/MUM/2019 ( ASSESSMENT YEAR: 2011-12,2012-13,2014-15 &2015-16 ) SMT. NAYANA B.GADHIYA 701, MILLENNIUM APT, LALLUBHAI PARK, EXTN.ROAD VILE PARLE(W) MUMBAI-400 056 VS. DCIT,CC-5(3) ROOM NO.1906 AIR INDIA BUILDING NARIMAN POINT MUMBAI-400 021 PAN/GIR NO. AGPPG6729H ( APPELLANT ) .. ( RESPONDENT ) ITA NOS.2783 & 2784/MUM/2019 ( ASSESSMENT YEARS: 2014-15 & 2015-16 ) SHRI BHARAT L. GADHIYA HUF 701, MILLENNIUM APT, LALLUBHAI PARK, EXTN.ROAD VILE PARLE(W) MUMBAI-400 056 VS. DCIT,CC-5(3) ROOM NO.1906 AIR INDIA BUILDING NARIMAN POINT MUMBAI-400 021 PAN/GIR NO. AAHHB7833B ( APPELLANT ) .. ( RESPONDENT ) ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 3 ITA NOS.2800 TO 2803/MUM/2019 ( ASSESSMENT YEARS: 2011-12,2012-13,2014-15 & 2015-16 ) SHRI ARUN L GADHIYA 701, MILLENNIUM APT, LALLUBHAI PARK, EXTN.ROAD VILE PARLE(W) MUMBAI-400 056 VS. DCIT,CC-5(3) ROOM NO.1906 AIR INDIA BUILDING NARIMAN POINT MUMBAI-400 021 PAN/GIR NO.AAKPG0294L (APPELLANT ) .. ( RESPONDENT ) ITA NOS.2781 & 2782/MUM/2019 ( ASSESSMENT YEARS: 2014-15 & 2015-16 ) SHRI ARUN L GADHIYA HUF 701, MILLENNIUM APT, LALLUBHAI PARK, EXTN.ROAD VILE PARLE(W) MUMBAI-400 056 VS. DCIT,CC-5(3) ROOM NO.1906 AIR INDIA BUILDING NARIMAN POINT MUMBAI-400 021 PAN/GIR NO.AA LHA4260P ( APPELLANT ) .. ( RESPONDENT ) ITA NOS.2809 TO 2812/MUM/2019 ( ASSESSMENT YEARS: 2011-12, 2012-13, 2014-15 & 2015- 16 ) SMT. RITA B. GADHIYA 701, MILLENNIUM APT, LALLUBHAI PARK, EXTN.ROAD VILE PARLE(W) MUMBAI-400 056 VS. DCIT,CC-5(3) ROOM NO.1906 AIR INDIA BUILDING NARIMAN POINT MUMBAI-400 021 PAN/GIR NO. AGDPG0884H ( APPELLANT ) .. ( RESPONDENT ) ITA NOS.2789 TO 2792/MUM/2019 ( ASSESSMENT YEAR: 2011-12,2012-13, 2014-15 & 2015-16 ) SMT. SANGITA A.GADHIYA 701, MILLENNIUM APT, LALLUBHAI PARK, EXTN.ROAD VILE PARLE(W) MUMBAI-400 056 VS. DCIT,CC-5(3) ROOM NO.1906 AIR INDIA BUILDING NARIMAN POINT MUMBAI-400 021 PAN/GIR NO. AGDPG0897L ( APPELLANT ) .. ( RESPONDENT ) ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 4 ASSESSEE BY SHRI SANJAY N. KAPADIA,AR REVENUE BY SHRI PRATAP SINGH, DR DATE OF HEARING 2 3 /12 /2020 DATE OF PRONOUNCEMENT 29/01/2021 / O R D E R PER RAJESH KUMAR (A.M): THE PRESENT APPEALS BY DIFFERENT ASSESSEES HAVE BEE N PREFERRED AGAINST THE ORDER DATED 22.02.2019 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER R EFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT YEARS 2011-12 ,2012- 13,2014-15 & 2016-17. ITA NO.2787/M/2019 A.Y. 2014-15 2. THIS APPEAL IS ARGUED AS LEAD CASE AND IS BEING TAKEN FOR ADJUDICATION ACCORDINGLY. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: GROUND NO.1 THE LEARNED CIT(A) ERRED IN UPHOLDING THE ORDER PAS SED BY THE LEARNED AO UNDER SECTION 153A OF THE ACT, EVEN THOUGH NO INCRIMINATI NG MATERIAL WAS FOUND DURING THE SEARCH ACTION. THE SAID ORDER IS CONTRARY TO TH E FACTS AND CIRCUMSTANCES OF THE CASE AND THE APPLICABLE PROVISIONS OF THE ACT AND I T MUST THUS BE DECLARED INVALID. GROUND NO.2 WITHOUT PREJUDICE TO GROUND NOS.1 ABOVE, THE LEARNE D CIT(A) ERRED, UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE APPLICA BLE PROVISIONS OF THE ACT, IN UPHOLDING THE ASSESSMENT ORDER U/S 153A R.W.S. 143( 3) OF THE ACT, SINCE THE SAME WAS PASSED IN VIOLATION OF THE PRINCIPLES OF NATURA L JUSTICE AND IT MUST THUS BE DECLARED INVALID. GROUND NO.3 WITHOUT PREJUDICE TO GROUND NOS.1 AND 2 ABOVE, THE LEARNED CIT(A) ERRED IN UPHOLDING THE ADDITION RS.16,82,26,728/- TO THE APP ELLANTS TOTAL INCOME, UNDER ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 5 THE PROVISIONS OF SECTION 68 OF THE ACT AND THE SAM E MUST BE DELETED BEING CONTRARY TO THE FACTS OF THE CASE AND THE APPLICABL E PROVISIONS OF THE ACT. 3. WE ARE FIRST ADJUDICATING THE GROUND NO.3 WHICH IS WITHOUT PREJUDICE TO GROUND NO.1 & 2. 4. THE ISSUE RAISED IN GROUND NO.3 IS AGAINST THE O RDER OF LD. CIT(A) UPHOLDING THE ADDITION OF RS.16,82,26,728/- BY LD. CIT(A) WHICH WAS MADE BY THE AO UNDER SECTION 68 OF THE ACT BY REJECTING THE CLAIM OF THE ASSESSEE IN RESPECT OF LONG TERM CAPITAL GAIN ON SALE OF SHARES UNDER SECTION 10(38) OF THE ACT. 5. THE FACTS IN BRIEF ARE THAT THE ASSESSEE FILED T HE RETURN OF INCOME ON 30.07.2014 DECLARING AN INCOME OF RS.6,08 ,070/- BY CLAIMING RS. 16,46,90843/- AS EXEMPT U/S 10(38) OF THE ACT IN RESPECT OF LONG TERM CAPITAL GAIN ON SALE OF EQUITY SHARES OF GLOBAL INFRA & FINANCE LTD. PERTINENT TO STATE THAT THE DDIT(INV.) UNIT-6(3), MUMBAI CARRIED OUT A SEARCH A ND SEIZURE OPERATION ON GADHIYA FAMILY AND THEIR BUSINESS PREM ISES INCLUDING THE ASSESSEE ON 06.01.2016 UNDER SECTION 132(1) OF THE ACT DURING WHICH THE SEARCH TEAM HAS IMPOUNDED VARIOUS INCRIMINATING MATERIAL/DOCUMENTS AND RECORDED A STA TEMENT OF THE VARIOUS MEMBERS OF THE FAMILY INCLUDING THE ASS ESSEE UNDER SECTION 132(4) OF THE ACT. THE GADHIYA FAMILY COMP RISED OF SHRI VINOD L. GADHIYA, HIS WIFE SMT. BHAVNABEN VINOD GADHI YA, THEIR SONS SHRI PARTH VINOD GADHIYA, SHRI DIVYESH VIN OD GADHIYA, SHRI BHARAT LALJIBHAI GADHIYA, HIS WIFE SM T. NAYANABEN BHARAT GADHIYA, SHRI BIPIN LALJIBHAI GADH IYA, HIS WIFE SMT. RITA BIPIN GADHIYA, SHRI ARUNKUMAR LALJIB HAI GADHIYA AND HIS WIFE SMT. SANGITA ARUN GADHIYA ALON G WITH THEIR RESPECTIVE HUFS AND BUSINESS CONCERNS/ENTITIE S. THE ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 6 ASSESSEE IS AN INDIVIDUAL AND IS A REGULAR INVESTOR S IN THE STOCK MARKET AND CARRIES OUT PURCHASES AND SALES OF SHARE S ON STOCK EXCHANGE THROUGH REGISTERED BROKERS ON THE RECOGNIS ED STOCK EXCHANGE. THE MAIN FINDINGS OF THE SEARCH TEAM WA S THAT GADHIYA GROUP HAS BEEN INDULGING IN TAX EVASION ON A LARGE SCALE OVER THE YEARS BY GENERATING UNACCOUNTED MON EY FROM VARIOUS BUSINESSES SUCH AS CONSTRUCTION AND DEVELO PMENT OF REAL ESTATE BUSINESS AND DIAMOND TRADINGS ETC. AND SUCH UNACCOUNTED MONEY SO GENERATED WAS BROUGHT BACK IN THE BOOKS OF GADHIYA FAMILY IN THE FORM OF LONG TERM CA PITAL GAIN THROUGH THE ALLEGED BOGUS TRANSACTIONS OF PURCHAS E AND SALES OF SHARES ARRANGED BY GADHIYA FAMILY THROUGH REGIST ERED BROKERS/ EXIT PROVIDERS TO THE TUNE OF RS.74,58,40, 840/-. CONSEQUENT TO THE SEARCH ALL THE CASES WERE CENTRAL IZED UNDER SECTION 127(2) OF THE ACT WITH DCIT CC-5(3), MUMBAI VIDE CENTRALIZATION ORDER NO.PR. CIT-25/HQRS/127(2)/2016 -17 DATED 12.07.2016 FOR COORDINATED INVESTIGATION. A NOTICE UNDER SECTION 153A OF THE ACT WAS ISSUED ON 26.12.2016 W HICH WAS DULY SERVED UPON THE ASSESSEE AND COMPLIED WITH B Y THE ASSESSEE BY SUBMITTING THE RETURN OF INCOME DECLAR ING TOTAL INCOME OF RS.6,07,760/- ON 26.01.2017. ACCORDING T O THE AO, THE ASSESSEE HAS ROUTED THE CASH GENERATED FROM ITS BUSINESS OF REAL ESTATE, CONSTRUCTION & DEVELOPMENT OF REAL ES TATES AND TRADING OF DIAMONDS BY WAY OF BOGUS LONG TERM CAPIT AL GAIN WHICH WERE GENERATED THROUGH THE PURCHASE AND SALE OF SHARES OF M/S. GLOBAL INFRA TECH AND FINANCE PVT. LTD. THE ASSESSEE AND HIS FAMILY EVADED THE TAX ON THE SAID BOGUS GAI N BY CLAIMING AS EXEMPT UNDER SECTION 10(38) OF THE ACT. THE ASSESSEE PURCHASED 2,25,000 EQUITY SHARES OF M/S. GLOBAL ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 7 INFRA TECH AND FINANCE PVT. LTD. IN THE PREFERENTIA L ALLOTMENT ON 19.01.2012 AT RS.35,35,885/-. THEREAFTER THE SHARES OF GLOBAL INFRA. & FINANCE LTD WERE LISTED ON STOCK EXCHANGE . THE SHARES PRICES WENT UP IN A PHENOMENAL PATTERN. THE REAFTER THE SHARES WERE SPLIT AND SUBDIVIDED IN THE RATIO OF 1: 10 SHARES MEANING THEREBY THAT SHARE OF RS. 10/- WAS SPLIT IN TO 10 SHARES OF THE FACE VALUE OF RS.1/- EACH. THIS WAS FOLLOWE D BY A BONUS ISSUE IN THE RATIO OF 10:1. THE ASSESSEE SOLD 2250 00 SHARES AFTER HOLDING MORE THAN 12 MONTHS DURING A PERIOD R ANGING BETWEEN 28.5.2013 AND 18.07.2013 FOR A TOTAL CONS IDERATION OF RS.16,82,26,728/- AT AN AVERAGE PRICE OF RS. 74.77/ -THEREBY GENERATING A LONG TERM CAPITAL GAIN OF RS.16,46,90, 843/- WHICH WAS CLAIMED AS EXEMPT UNDER SECTION 10(38) OF THE A CT. THE DETAILS OF ALL SALES TRANSACTIONS MADE BY THE ASSES SEE ARE GIVEN IN THE TABLE IN PARA 9.3.4. IN THE ASSESSMENT ORDER . ACCORDING TO THE AO THE SAID CAPITAL GAIN WAS GENERATED BY THE A SSESSEE THROUGH ACCOMMODATION ENTRIES TAKEN FROM VARIOUS BROKERS/INTERMEDIARIES/EXIT PROVIDERS WHO WERE ALLE GEDLY ENGAGED IN PROVIDING VARIOUS TYPES OF ACCOMMODATION ENTRIES INCLUDING BOGUS LONG TERM CAPITAL GAIN TO VARIOUS B ENEFICIARIES AGAINST THE RECEIPT OF UNACCOUNTED CASH IN CONSIDER ATION OF COMMISSION CHARGED. ACCORDING TO THE ASSESSEE SINC E THE SHARES WERE PURCHASED ON PREFERENTIAL ALLOTMENT FRO M THE COMPANY AND SOLD IN THE BOMBAY STOCK EXCHANGE THROU GH A REGISTERED BROKERS, THERE IS NO QUESTION OF BOGUS T RANSACTIONS IN SHARES. THE AO RECORDED A DETAILED FINDINGS ON HOW THIS LONG TERM CAPITAL GAIN WAS REALIZED AND MODUS OPERANDI THROUGH ACCOMMODATION ENTRIES PROVIDED BY THE ENTRY PROVIDE R IN PARA 5 & 6 OF THE ASSESSMENT ORDER. THE AO ALSO NOTED THA T M/S. ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 8 GLOBAL INFRA & FINANCE PVT. LTD. RAISED RS.30,53,2 5,000/- BY WAY OF PREFERENTIAL ALLOTMENT OF 2,03,55,000 SHARES TO PREFERENTIAL ALLOTTEES/SUBSCRIBERS IN TWO ROUNDS OF ALLOTMENT. IN THE FIRST ROUND 1,05,05,000 SHARES WERE ALLOTTED ON 19.01.2012 AT A VALUE OF RS.15 PER SHARE OF FACE VA LUE OF RS.10/- EACH AT A PREMIUM OF RS.5/-. THESE SHARES WERE LISTED ON STOCK EXCHANGE ON 28.02.2012. IN THE 2 ND ROUND OF PREFERENTIAL ALLOTMENT 98,50,000 SHARES WERE ALLOTT ED ON 12.06.2012 AT A VALUE OF RS.15/- COMPRISING RS.10/- AS FACE VALUE AND RS.5 AS PREMIUM OF SHARE. THESE SHARES W ERE LISTED IN THE STOCK EXCHANGE ON 24.07.2012. THE AO NOTED THAT THE PRICE OF THE SHARES WITNESSED PHENOMENAL UPWARD SWI NG IMMEDIATELY AFTER THE PREFERENTIAL ALLOTMENT. THER EAFTER, THE EXISTING SHARES WERE SPLIT AND SUB DIVIDED IN THE R ATIO OF 1:10 ON 13.12.2012 THEREBY SPLIT AT SHARE OF FACE VALUE OF RS.10 INTO 10 EQUITY SHARES OF FACE VALUE OF RS.1 EACH. THERE AFTER BONUS ISSUE IN THE RATIO OF 10:1 WHEREBY FOR EVERY SHARE HELD BY SHAREHOLDER THEY WERE ALLOTTED MORE SHARE OF M/S. G LOBAL INFRA TECH AND FINANCE PVT. LTD. INCLUDING TO THE ASSESSE E. IN PARA 9.3.4 THE AO APPENDED A TABLE DEMONSTRATING HOW THE ASSESSEE HAS SOLD THE SHARE AT A PRICE WHEN IT WAS AT THE PE AK FROM PARA 9.3.5 TO PARA 9.3.13, THE AO DISCUSSED THE MOVEMENT OF SHARES, QUANTITY TRADED AND TOTAL VALUE OF SHARE TRADING. THE AO ALSO DISCUSSED HOW THE ENTRY PROVIDERS ARRANGED THE SALE OF SHARES ON BOMBAY STOCK EXCHANGE. THE AO ALSO REFERRED AND REPRODUCED THE STATEMENTS RECORDED OF SHRI SAJAN DA MODAR PRASAD GADHIYA, CHAIRMAN AND DIRECTOR OF PSIT INFRA STRUCTURE AND SERVICES LTD. AND HIS ADMISSION THAT M/S. GLOBA L INFRA.AND FINANCE PVT. LTD. AND PSIT INFRA AND SERVICE LTD. W ERE BOTH ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 9 MANAGED AND MANIPULATED BY ENTRY PROVIDER SHRI JAGD ISH PUROHIT AND BOGUS ENTRIES OF LONG TERM CAPITAL GAIN ARE ARRANGED THROUGH THESE SCRIPS BY SHRI JAGDISH PUROH IT. THE STATEMENT IS REPRODUCED IN PARA 11.1 OF THE ASSESSM ENT ORDER. THE AO ALSO REFERRED TO THE STATEMENT OF SHRI MANOJ KUMAR AGGARWAL WHOSE STATEMENT WAS RECORDED UNDER SECTION 131 DURING THE COURSE OF SURVEY OPERATION UNDER SECTION 133A OF THE ACT WHO IS THE DIRECTOR OF M/S. DESTINY COMMODITIES PVT. LTD., M/S. DESTINY SECURITIES LTD., M/S. DESTINY SAFAL DE ALERS PVT. LTD., M/S. DESTINY POWER MERCHANTS PVT. LTD. AND M/ S. HONEYBEE AGENCIES PVT. LTD. THE AO ALSO REPRODUCED THE STATEMENT OF SHRI VINOD L. GADHIYA THE ASSESSEE RECO RDED DURING THE COURSE OF SEARCH IN PARA 12.1 WHEN HE WA S CONFRONTED WITH THE INCRIMINATING OBSERVATIONS OF T HE SEARCH TEAN AND ALSO OF VARIOUS INDIVIDUAL AS STATED ABOVE . THE ASSESSEE MAINTAINED THAT THE SHARES OF M/S. GLOBAL INFRA. AND FINANCE PVT. LTD. WERE OBTAINED THROUGH PREFERENTIA L ALLOTMENT ON THE RECOMMENDATION OF SHRI VIJAYBHAI JAIN. THE AS SESSEE IN HIS DIFFERENT STATEMENTS, DURING SEARCH AND POST SE ARCH DENIED TO HAVE TAKEN ANY ACCOMMODATION ENTRIES OF LONG TER M CAPITAL GAIN. THE AO ALSO REFERRED TO THE SEBI ORDER PAS SED AGAINST CERTAIN ENTITIES WHO WERE ENGAGED IN MANIPULATING T HE SHARES IN PARA 13.1 TO 13.6 AND ALSO VARIOUS ENTITIES RELA TED COLLUDING IN AFFECTING ALL THESE TRANSACTIONS AND THUS A COMP LETE MODUS OPERANDI IN GENERAL HAS BEEN DISCUSSED. FINALLY, T HE AO CAME TO CONCLUSION THAT M/S. GLOBAL INFRA. AND FINANCE P VT. LTD. WAS NOTHING BUT A PRE-ARRANGED AND WELL ORGANIZED SY STEM OF PROVIDING ACCOMMODATION ENTRIES AND RE-ROUTING THE UNACCOUNTED MONEY. IN THIS GROUND, FINALLY, THE AO ISSUED A ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 10 SHOW CAUSE NOTICE DATED 16.10.2017 CALLING UPON THE ASSESSEE TO PROVE THE GENUINENESS OF THE LONG TERM CAPITAL G AIN OF RS. 16,46,90,843/- UNDER SECTION 10(38) OF THE ACT. TH E ASSESSEE WAS ALSO CONFRONTED THE VARIOUS EVIDENCES AND SEQUE NCE OF EVENTS GATHERED DURING THE COURSE OF SEARCH AND POS T SUCH PERIOD THE ASSESSEE WAS ALSO PROVIDED COPIES OF STA TEMENTS OF SHRI SAJAN DAMODAR PRASAD GADHIYA, SHRI MANOJ KUMAR AGGARWAL, SHRI SANJAY DEY, SHRI RAJ KUMAR GADHIYA A ND SHRI SOUMAN CHOUDHARY WHEREIN THESE PERSONS HAVE ADMITTE D TO HAVE RIGGED THE PRICES OF M/S. GLOBAL INFRA TECH AN D FINANCE PVT. LTD. TO FACILITATE AND REALIZE THE LONG TERM C APITAL GAIN IN THE HANDS OF THE ASSESSEE. THE SAID SHOW CAUSE NOT ICE WAS RESPONDED BY THE ASSESSEE VIDE WRITTEN SUBMISSION D ATED 14.11.2017 WHICH HAS BEEN REPRODUCED BY THE AO IN P ARA 18.1 FROM PAGE NO.95 TO 110. THE ASSESSEE PRODUCED THE FOLLOWING CORROBORATING EVIDENCES BEFORE THE AO IN SUPPORT O F ITS CLAIM OF EXEMPTION UNDER SECTION 10(38) ON LONG TERM CAPITAL GAIN ON SALE OF SHARES: I. EVIDENCE OF PURCHASE OF SHARES APPLICATION OF SHA RES, ALLOTMENT OF SHARES, SHARE CERTIFICATES II. EVIDENCE OF PAYMENT FOR PURCHASE OF SHARES MADE BY ACCOUNT PAYEE CHEQUES, COPY OF BANK STATEMENTS III. COPY OF DEMAT STATEMENT REFLECTING PURCHASE IV. COPY OF DEMAT STATEMENT SHOWING SALE OF SHARES V. COPIES OF CONTRACT NOTE OF SALES OF SHARES VI. COPY OF BANK STATEMENT REFLECTING SALES RECEIPT VII. COPY OF BROKERS LEDGER. FINALLY, THE AO, AFTER REJECTING THE VARIOUS CONTE NTIONS AND SUBMISSIONS OF THE ASSESSEE AND IN A DETAILED FINDI NG IN RECORDED IN PARA 20 OF THE ASSESSMENT ORDER, CAME TO THE CONCLUSION THAT THE ASSESSEE HAS ALLEGEDLY OBTAINED LONG TERM CAPITAL GAIN BY PRE-ARRANGED AND WELL ORGANIZED TRA DING IN THE ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 11 SHARES OF M/S. GLOBAL INFRA TECH AND FINANCE PVT. L TD. ON THE BOMBAY STOCK EXCHANGE AND ACCORDINGLY REJECTED THE CLAIM OF THE ASSESSEE UNDER SECTION 10(38) OF THE ACT RESULT ING INTO AN ADDITION OF RS.16,82,26,728/- TO THE INCOME OF THE ASSESSEE IN ASSESSMENT FRAMED UNDER SECTION 143(3) READ WITH SE CTION 153A OF THE ACT, 1961 DATED 20.12.2017. 6. AGGRIEVED BY THE ORDER OF THE AO , THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A). IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) ALSO DEALT WITH AND DIS CUSSED THE ISSUE IN GREAT LENGTH BY REPRODUCING THE ORDER OF A O BERVATAM UP TO PAGE NO.125 FROM PARA 7.14 TO 7.32 IN THE APP ELLATE ORDER AND AFTER TAKING INTO CONSIDERATION THE CONTENTIONS AND SUBMISSIONS OF THE ASSESSEE, DISMISSED THE APPEAL B Y OBSERVING AND HOLDING AS UNDER: 7.14. ON CONSIDERATION OF THE FACTS OF THE CASE AS A WHOLE IT CANNOT BE ACCEPTED THAT THE GADHIYA GROUP COULD GENUINELY HAVE LONG TE RM CAPITAL GAINS OF RS. 72 CRORES SPREAD OVER FIVE YEARS ON COST OF INVESTMENT S OF A MEAGRE RS. 3.16 CRORES IN NON-DESCRIPT COMPANIES. THERE IS NOT A SINGLE INSTA NCE OF LOSS IN THESE SCRIPS DURING THIS PERIOD. THIS CANNOT BE A CASE OF INTELL IGENT INVESTMENT NOR A SIMPLE CASE OF TAX PLANNING TO GAIN BENEFIT OF LONG TERM C APITAL GAINS. THE ISSUE THAT THIS RAISES AND THE FACTS ARE HOWEVER, QUITE INTERESTING . SHRI VINOD LALJIBHAI GADHIYA ('VLG') HAD NO KNOWLEDGE OF FINANCIALS OF THESE PEN NY STOCKS, NOR WAS HE AWARE OF ANY SIGNIFICANT INFORMATION SUGGESTING A MANIFOL D PRICE RISE IN THESE SCRIPS, AS NOTED FROM HIS ANSWERS TO THE QUESTIONS PUT UP IN H IS STATEMENT RECORDED DURING SEARCH. THE PERSON WHO ADVISED HIM IS NOT AVAILABLE NOR HIS DETAILS ARE PROVIDED. THE ENTIRE TRANSACTIONS ARE SYNCHRONIZED AND CAREFU LLY PLANNED ONLY TO DEFEAT THE PURPOSE OF REVENUE AND EVADE TAXES. THE EARNINGS @ 2720 % OVER A PERIOD OF FIVE YEARS BREAKS THE CEILING OF ANY RECORD OF RETURN ON INVESTMENT WHICH IS BEYOND THE HUMAN PROBABILITY AND BEYOND THE BUSINESS LOGICS OF ANY ENTERPRISE. THIS IS IN RESPECT OF NOT ONE BUT 8 SCRIPS. IT IS THE GAIN WHI CH IS ABNORMAL, I.E., BOTH QUA THE SCRIP; ITS' TRADING AND, THUS, ITS QUANTUM, AND U NEXPLAINED, BESIDES BEING TAX EXEMPT, AND WHICH IS INDEPENDENT OF ITS PURCHASE. THE PURCHASE OF SHARES OF A LITTLE KNOWN COMPANY WOULD EVEN OTHERWISE HARDLY RA ISE ANY EYEBROW OR DOUBT. IT IS THE SALES, GIVEN THE HIGH RATES FOR SUCH PENNY S TOCKS, WITH NO REAL BUYERS, ARE BOGUS. THE COMPANIES, WHOSE SCRIPS HAVE GIVEN RISE TO SUCH FANTASTIC RETURNS HAVE NO STANDING EITHER IN THE INDUSTRY OR IN THE MARKET (I.E., FOR THE GOODS OR SERVICES IT PRESUMABLY DEALS IN), OR EVEN IN THE TRADING CIRCLE S, I.E., FOR SHARES. THAT APART, THERE IS NO MATERIAL TO ESTABLISH ITS BUSINESS ACTI VITY, VIZ. IT'S ANNUAL REPORTS, ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 12 OR OF THE COMPANIES UNDER THE SAME M ANAGEMENT/INDUSTRY, ETC., TO EXHIBIT ITS CREDENTIALS IN ANY MANNER. NO SUCH EVID ENCE IS FILED BY THE APPELLANT. RETURNS RANGING FROM 700% TO 36000% IS AMAZING BY A NY STANDARD AND WHICH HAS NOT BEEN EXPLAINED IN ANY MANNER. THERE IS AGAIN NO WHISPER AND, CONSEQUENTLY, NO INFORMATION ON RECORD OF THE PARTICULAR INDUSTRY /S IN WHICH, IF ANY, THE SAID COMPANY OPERATES, OR ITS FINANCIALS, MUCH LESS FUTU RE PROSPECTS, THE INFORMATION ON ALL OF WHICH GETS FACTORED INTO AND CAPTURED IN WHAT IS CALLED 'PRICE', REPRESENTING AN EQUILIBRIUM OF THE SUPPLY AND DEMAN D FORCES. WHO, ONE MAY ASK, ARE THE PURCHASERS OF SUCH SHARES, I.E., IN A NONDE SCRIPT COMPANY AT SUCH HIGH PRICES; NO INFORMATION QUA WHICH STANDS FURNISHED A T ANY STAGE, EVEN AS IT IS THEY WHO HAVE APPARENTLY BROUGHT THE SHARES, SUPPLYING T HE CREDIT TO THE ASSESSEE, WHICH IS BEING QUESTIONED AND EXAMINED AS TO ITS GE NUINENESS U/S. 68 OF THE ACT. ALL THIS DEFINITELY CASTS SERIOUS DOUBTS ON THE GEN UINENESS OF THE SALE PRICE AND, THUS, THE ENSUING GAIN. THIS, IN FACT, IS A CLASSIC AL FEATURE OF A PENNY STOCK, THE PRICE ZOOMING FOR NO APPARENT, ECONOMIC OR EVEN TECHNICAL , REASONS. ONE COULD UNDERSTAND WHERE THE SAME IS IN SYMPATHY WITH THE M ARKET SENTIMENT OR SOME INDUSTRY-WISE FAVOURABLE DEVELOPMENT, OR SOME SIGNI FICANT BREAKTHROUGH IN BUSINESS ACTIVITY OF THE COMPANY. IN FACT THE PRICE OF THE SCRIPS FELL BACK TO ITS LOW LEVELS AFTER THE BENEFICIARIES BOOKED THEIR LTCG. 7. 15. THE MATERIAL ON RECORD, AS TO CIRCULAR TRADI NG, IN CASE OF A PENNY STOCK COMPANY, EXPOSING OR VALIDATING THE MODUS OPERANDI AS STATED TO BE ADOPTED IN THE CASE OF SUCH STOCKS - THE PRICE, DE-HORS ANY FU NDAMENTALS OR OTHER FACTORS, OF PAPER COMPANIES BEING RAKED UP ON THE EXCHANGE, SO AS TO YIELD 'GAIN', AND THEN AGAIN, EQUALLY WITHOUT BASIS, GROUNDED TO YIELD 'LO SS, BOTH OF WHICH, I.E., 'GAIN AND LOSS', FIND READY 'CUSTOMERS' OR TAKERS'. THE PUR POSE IS TO EVADE TAX OR TO YIELD SOME TAX BENEFIT. IN THE PRESENT CASE, THE FEATURES ARE STRIKINGLY SAME, WITH THE IMPUGNED TRANSACTION BEARING THE SAME INCIDENTS, SO THAT ODDS ARE LOADED HEAVILY AGAINST THE GENUINENESS OF THE TRANSACTION. THE ONU S TO ESTABLISH THE SAME, IT IS TO BE BORNE IN MIND, IS ON THE APPELLANT. 7.16. THIS BY ITSELF SHOWS THAT THE GAINS ARE NOT G ENUINE. HOWEVER IN THIS CASE THERE IS PAINSTAKING EXTENSIVE INVESTIGATION OF KEY PLAYERS INVOLVED SUCH AS BROKERS, OPERATORS, DIRECTORS OF PENNY STOCK COMPAN IES, FINANCIALS AND PRICE MOVEMENTS OF SHARES OF THESE PENNY STOCK COMPANIES THAT HAVE BEEN HIGHLIGHTED IN THIS APPELLATE ORDER. 7.17.THE PREPONDERANCE OF PROBABILITIES ONLY DENOTE S THE SIMULTANEOUS EXISTENCE OF SEVERAL FACTS', EACH PROBABLE IN ITSELF, ALBEIT LOW, SO AS TO CAST A SERIOUS DOUBT ON THE TRUTH OF THE REPORTED FACTS', WHICH TOGETHER MA KE UP FOR A BIZARRE STATEMENT, LEADING TO THE INFERENCE OF COLLUSIVENESS OR A DEVI CE SET UP TO CONCEAL THE TRUTH, I.E., IN THE ABSENCE OF CREDIBLE AND INDEPENDENT EV IDENCES. FOR A SCRIP TO TRADE AT NEARLY 350TIMES ITS' FACE VALUE, ONLY IMPLIES, IF N OT PRICE MANIPULATION, TRAIL BLAZING PERFORMANCE AND/OR GREAT BUSINESS PROSPECTS (WITH O F COURSE PROVEN MANAGEMENT RECORD, SO AS TO BE ABLE TO TRANSLATE TH AT INTO REALITY), WHILE EVEN AS MUCH AS THE COMPANY'S BUSINESS OR INDUSTRY OR FUTUR E PROGRAM (ALL OF WHICH WOULD BE IN PUBLIC DOMAIN), IS CONSPICUOUS BY ITS ABSENCE , I.E., EVEN YEARS AFTER THE TRANSACTION/S. THE COMPANY IS, BY ALL COUNTS, A PAP ER COMPANY, AND ITS SHARE TRANSACTIONS, MANAGED. ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 13 7.18. THE HON'BLE SUPREME COURT IN THE CASE OF CFTV . DURGA PRASAD MORE [1971] 82 ITR 540 HELD AS UNDER : IT IS A STORY THAT DOES NOT ACCORD WITH HUMAN PROB ABILITIES, FT IS STRANGE THAT HIGH COURT FOUND FAULT WITH THE TRIBUNAL FOR N OT SWALLOWING THAT STORY. IF THAT STORY IS FOUND TO BE UNBELIEVABLE AS THE TR IBUNAL HAS FOUND AND IN OUR OPINION, RIGHTLY THAT THE DECISIONS REMAINS THA T THE CONSIDERATION FOR THE SALE PROCEEDED FROM THE ASSESSEE AND THEREFORE, IT MUST BE ASSUMED TO BE HIS MONEY. IT IS SURPRISING THAT THE HIGH COURT HAS FOUND FAUL T WITH THE /TO/OR NOT EXAMINING THE WIFE AND THE FATHER-IN-LAW OF THE ASS ESSEE FOR PROVING THE DEPARTMENT'S CASE. ALL THAT WE CAN SAY IS THAT THE HIGH COURT HAS IGNORED THE FACTS OF LIFE. R IS UNFORTUNATE THAT THE HIGH C OURT HAS TAKEN A SUPERFICIAL VIEW OF THE ONUS THAT LAY ON THE DEPARTMENT.' 7.19. IT IS TRUE THAT WHEN TRANSACTIONS ARE THROUGH CHEQUES, TRANSACTED THROUGH STOCK EXCHANGE, IT LOOKS LIKE REAL TRANSACTION BUT AUTHORITIES ARE PERMITTED TO LOOK BEHIND THE TRANSACTIONS AND FIND OUT THE MOTIVE BEH IND TRANSACTIONS. GENERALLY, IT IS EXPECTED THAT APPARENT IS REAL BUT IT IS NOT SAC ROSANCT. IF FACTS AND CIRCUMSTANCES SO WARRANT THAT IT DOES NOT ACCORD WITH THE TEST OF HUMAN PROBABILITIES, TRANSACTIONS HAVE BEEN HELD TO BE NON-GENUINE. IT I S HIGHLY IMPROBABLE THAT SHARE PRICE OF A WORTHLESS COMPANY CAN GO BY 2800% IN ONE YEAR. MERE PAYMENT BY CHEQUE AND RECEIPT BY CHEQUE DOES NOT RENDER A TRAN SACTION GENUINE. CAPITAL GAIN TAX WAS CREATED TO OPERATE IN A REAL WORLD AND NOT THAT OF MAKE BELIEF. FACTS OF THE CASE ONLY LEAD TO THE INFERENCE THAT THESE TRANSACT IONS ARE NOT GENUINE AND MAKE BELIEVE FOR BRINGING IN UNACCOUNTED INCOME AS TAX E XEMPT LTCG. 7.20. THE ASSESSEE/APPELLANT AND OTHER MEMBERS OF G ADHIYA GROUP DO NOT REGULARLY DEAL IN SHARES NOR HAD THE EXPERIENCE OR EXPERTISE OF INVESTING IN SHARE MARKET. NO OTHER WORTHWHILE INVESTMENT IN EQUITY SH ARES IN ANY OTHER COMPANY YIELDING SIMILAR INCOME HAS BEEN DISCLOSED IN ANY O F THE CASE OF GADHIYA GROUP. VARIOUS ASSESSES OF THE GADHIYA GROUP AS NOTED BY A O HAVE SIMULTANEOUSLY TRADED IN THE SAME SCRIP AT THE SAME TIME RESULTING IN SIMILAR CAPITAL GAIN IN VARIOUS CASES. THE APPELLANT HAS MISERABLY FAILED T O REBUT THAT VARIOUS CONTENTIONS AND FINDINGS RECORDED BY AO ABOUT SERIOUS DISCREPAN CIES, CAUSING SERIOUS DOUBTS ON THE GENUINENESS OF THESE TRANSACTIONS. 7.21. RELIANCE CAN BE PLACED ON THE THREE AUTHORITA TIVE DECISIONS OF HON'BLE SUPREME COURT IN THIS BEHALF LAYING DOWN PREPOSITIO N THAT WITHOUT APPRECIATING THE GENUINENESS OF TRANSACTION SOLE RELIANCE CANNOT BE PLACED ON DOCUMENTS AND THE SAME ARE TO BE EXAMINED IN THE LIGHT OF SURROUN DING CIRCUMSTANCES AND HUMAN PROBABILITIES. (I) C1T VS. DURGA PRASAD MORE, 82 ITR 540 (SC) (II) SUMATI DAYAL. VS. CIT, 214 ITR 801 (SC) (III) CIT VS. P, MOHANKALA, (2007) 291 ITR 278 (SC) ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 14 HERE IT WILL BE PERTINENT TO NOTE THE OBSERVATION O F THE HON'BLE SUPREME COURT IN THE CASE OF SUMATI DAYAL V. CIT, 214 ITR 801 (SC) M ADE IN THE CONTEXT OF SALE AND PURCHASE TRANSACTIONS OF PRIZE WINNING LOTTERY TICK ETS WHICH ARE VERY MUCH APPLICABLE TO THE FACTS OF THE CASE. THE SAME ARE A S EXTRACTED HERE UNDER: 'THE MATTER HAS TO BE CONSIDERED IN THE LIGHT OF HU MAN PROBABILITIES. THE CHAIRMAN OF THE SETTLEMENT COMMISSION HAS EMPHASISE D THAT THE APPELLANT DID POSSESS THE WINNING TICKET WHICH WAS SURRENDERED TO THE RACE CLUB AND IN RETURN A CROSSED CHEQUE WAS OBTAIN ED. IT IS, IN OUR VIEW, A NEUTRAL CIRCUMSTANCE, BECAUSE IF THE APPELLANT HAD PURCHASED THE WINNING TICKET AFTER THE EVENT SHE WOULD BE HAVING THE WINN ING TICKET WITH HER WHICH SHE COULD SURRENDER TO THE RACE CLUB. THE OB SERVATION BY THE CHAIRMAN OF THE SETTLEMENT COMMISSION THAT 'FRA UDULENT SALE OF WINNING TICKET IS NOT AN USUAL PRACTICE BUT IS VERY MUCH OF AN UNUSUAL PRACTICE' IGNORES THE PREVALENT MALPRACTICE THAT WAS NOTICE D BY THE DISTRICT TAXES ENQUIRY COMMITTEE AND THE RECOMMENDATION S MADE BY THE SAID COMMITTEE WHICH LED TO THE AMENDMENT OF THE ACT B Y THE FINANCE ACT OF 1972 WHEREBY THE EXEMPTION FROM TAX THAT WAS AVAILA BLE IN RESPECT OF WINNINGS FROM LOTTERIES, CROSSWORD PUZZLES, RACES, ETC. WAS WITHDRAWN. SIMILARLY THE OBSERVATION BY THE CHAIRMAN THAT IF I T IS ALLEGED THAT THESE TICKETS WERE OBTAINED THROUGH FRAUDULENT MEANS, IT IS UPON THE ALLEGER TO PROVE THAT IT IS SO, IGNORES THE REALITY. THE TRANS ACTION ABOUT PURCHASE OF WINNING, TICKET TAKES PLACE IN SECRET AND DIRECT EV IDENCE ABOUT SUCH PURCHASE WOULD BE RARELY AVAILABLE. AN INFERENCE AB OUT SUCH A PURCHASE HAS TO BE DRAWN ON THE BASIS OF THE CIRCUMSTANCES A VAILABLE ON THE RECORD. HAVING REGARD TO THE CONDUCT OF THE APPELLANT AS DI SCLOSED IN HER SWORN STATEMENT AS WELL AS OTHER MATERIAL ON THE RECORD A N INFERENCE COULD REASONABLY BE DRAWN THAT THE WINNING TICKETS WERE P URCHASED BY THE APPELLANT AFTER THE EVENT. WE ARE, THEREFORE, UNABLE TO AGREE WITH THE VIEW OF THE CHAIRMAN IN HIS DISSENTING OPINION. IN OUR OPINION, THE MAJORITY OP INION AFTER CONSIDERING SURROUNDING CIRCUMSTANCES AND APPLYING THE TEST OF HUMAN PROBABILITIES HAS RIGHTLY CONCLUDED THAT THE APPELLANT'S CLAIM AB OUT THE AMOUNT BEING HER WINNING FROM RACES IS NOT GENUINE. IT CANNOT BE SAID THAT THE EXPLANATION OFFERED BY THE APPELLANT IN RESPECT OF THE SAID AMOUNTS HAS BEEN REJECTED UNREASONABLY AND THAT THE FINDING THA T THE SAID AMOUNTS ARE INCOME OF THE APPELLANT FROM OTHER SOURCES IS NOT, BASED ON EVIDENCE.' SO ALSO, REFERENCE CAN BE MADE TO THE OBSERVATION O F THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS.DURGA PRASAD MORE, 82 ITR 540 (SC) TO THE EFFECT THAT THE CONTENTS IN THE DOCUMENTS CANNOT BE GIVEN UNDUE IMP ORTANCE AND, THE REALITY AND SUBSTANCE OF THE TRANSACTION IS TO BE CONSIDERED. 7.22. IT HAS TO BE APPRECIATED THAT THE REVENUE AUT HORITIES ARE FUNCTIONING IN A DEMOCRATIC SET-UP AND ARE NOT DISCHARGING THEIR DUT IES IN A POLICE STATE, WHEREBY THEY CAN FORCE THE ASSESSEE/APPELLANT AND CO-CONSPI RATORS TO ADMIT THE TRUTH OF THE TRANSACTIONS THOUGH THE SAME APPEARS TO BE OBVI OUS AND APPARENT AND IT IS USUAL ON THE PART OF THE APPELLANT/ASSESSEE AND THE RE ARE CO-CONSPIRATORS/ABETTOR ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 15 AND THEN FOR THE AR TO CLAIM AND CONTEND THAT THERE IS NO DIRECT EVIDENCE. IN THE PRESENT CASE IN THE COURSE OF SEARCH THERE IS EXTEN SIVE ADMISSIONS BY VARIOUS OPERATORS. 7.23. FIRSTLY, THESE TRANSACTIONS WHICH ARE NORMALL Y WELL-DOCUMENTED AND ARE SECRETLY NEGOTIATED ARE SCRUTINIZED BY THE AO AFTER A SUFFICIENT GAP OF TIME I. E. NEARLY TWO YEARS FROM THE END OF THE RELEVANT F. Y. AND THEN WHEN THE APPELLANT/ ASSESSEE AND THE OTHER PERSONS ABETTING THE ASSESSE E IN SUCH MANIPULATION ARE CONFRONTED BY THE AO, THERE IS USUAL TENDENCY TO EV ADE THE REPLIES OR IN THE LEAST TO DELAY THE REPLIES. THE AO AGAIN HAS TO FINALIZE THE PROCEEDINGS WITHIN THE STATUTORY LIMITATION INVOLVED AND THEN HE CANNOT DE VOTE THE ENTIRE TIME AVAILABLE AT HIS DISPOSAL TO A PARTICULAR CASE. 7.24. FURTHER JUDICIAL NOTICE IN THE AFORESAID FACT S IS REQUIRED TO BE TAKEN OF PREVAILING MALPRACTICE IN THE FIELD OF MANIPULATION OF STOCK PRICES OF SUCH DUBIOUS COMPANIES BY THE OPERATOR AND MANIPULATORS WITH OR WITHOUT THE ACTIVE HELP AND ASSISTANCE OF MANAGEMENT TO SPREAD RUMOURS OR HIGHL Y EXAGGERATED GROWTH/PROFIT PROSPECTS OF SUCH COMPANIES LEADING TO SUCH PHENOME NAL PRICERISE. REFERENCE CAN BE MADE TO THE FOLLOWING DECISIONS: (A) CWT V. ROHTAS INDUSTRIES LTD., 67 ITR 283(SC), WHEREIN IT WAS HELD THAT: 'IN THE ABSENCE OF ANY DIRECT EVIDENCE, A JUDICIAL OR QUASI-JUDICIAL TRIBUNAL CAN BASE ITS CONCLUSION ON THE BASIS OF WHAT ARE KN OWN AS NOTORIOUS FACTS BEARING IN MIND THE PRINCIPLES OF SECTION 144 OF TH E EVIDENCE ACT.' (B) ATTAR SINGH GUNNUKH SINGH V. ITO 191 ITR 667 (S C)WHEREIN, WHILE INTERPRETING THE PROVISIONS OF SECTION 40A(3), IT WAS HELD THAT 'IN INTERPRETING A TAXING STATUTE, THE COURT CANNOT BE OBLIVIOUS OF THE PROLIFERATION OF BLACK MONEY WHICH IS UNDER CIRCULA TION IN OUR COUNTRY.' IN THE CASE ON HAND ALSO THE SCRIPS WERE OF UNKNOWN OR LESSER KNOWN COMPANY, SALE PRICE WAS FANTASTIC, THERE WAS NO ECONOMIC OR FINANCIAL BASIS TO JUSTIFY THE PRICE RISE (POOR FINANCIAL AS ANALYSED BY AO), SHA RE TRANSACTIONS WERE DUBIOUS (AS HELD BY VARIOUS DEPARTMENTS INCLUDING SEBI INVESTIG ATION WING ETC.), THE COMPANY DID NOT QUALIFY FOR INVESTMENT, THE ASSESSEE WAS AB LE TO SELL THE SHARES AT AN ABNORMALLY HIGH PRICE AS COMPARED TO PURCHASE PRICE AND THAT TOO WITHIN A SHORT PERIOD AND THE FANTASTIC SALE PRICE WAS NOT AT ALL POSSIBLE AS THERE WAS NO ECONOMIC OR FINANCIAL BASIS. 7.25. IT IS NOTED FROM THE PRICE QUOTED ON THE STOC K EXCHANGE THAT THERE WAS ABNORMAL PRICE RISE IN THESE SCRIPS AS COMPARED WIT H THE OVERALL PERCENTAGE INCREASE IN SENSEX DURING THE SAME PERIOD. THERE IS ABSOLUTELY NOTHING TO JUSTIFY DIZZYING RISE OF PRICES OF THE PENNV STOCKS, WHICH HAVE MOVED IN ABSOLUTE DISREGARD TO THE GENERAL MARKET SENTIMENTS. ANALYSI S OF DATA SHOWED THAT THAT THE PRICE OF THESE SHARES HAVE SEEN PHENOMENAL RISE AND HAVE BEEN CONSTANTLY TRADED NEAR THE CIRCUIT LIMIT SO AS TO AVAIL MAXIMUM PRICE RISE WITHOUT HITTING AND1 TRIGGERING THE CIRCUIT LIMIT, AND THEREBY AVOID SUR VEILLANCE BY THE STOCK EXCHANGE ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 16 REGULATOR. THIS CONTINUOUS PRICE RISE HAS BEEN ACHI EVED OVER A VERY THIN VOLUME AND ALMOST A SINGLE TRADE PER DAY.DURING THIS PERIO D OF PRICE RISE, NO CORPORATE ANNOUNCEMENT HAS BEEN MADE WHICH WOULD HAVE MADE A POSITIVE IMPACT ON THE SHARES AND WHICH COULD SUPPORT THIS PHENOMENAL INCR EASE IN PRICE. 7.26. THE AO HAS ALSO EXAMINED THE SEBI'S FINDINGS ABOUT THE ACCOMMODATION ENTRY PROVIDERS OBTAINED ON THE BASIS OF VARIOUS IN VESTIGATIONS AND HAS BROUGHT OUT SUFFICIENT MATERIAL ON RECORD TO DEMONSTRATE TH AT THE TRANSACTIONS AXE NOT GENUINE AND HE ACCORDINGLY CONCLUDED THAT THE LONG TERM CAPITAL GAIN BOOKED ARE NOT GENUINE. 7.27. IT IS NOTED THAT SEBI NOT FINDING DIRECT EVID ENCE THAT THE APPELLANT WAS A CO- CONSPIRATOR IN PRICE MANIPULATION IN NO WAY DETRACT S FROM THE APPELLANT BEING A BENEFICIARY OF SUCH SYSTEMATIC OPERATIONS OF OPERAT ORS WHO HAS PURCHASED SUCH SERVICE. THE SEBI IS NOT DIRECTLY CONCERNED WITH TA X EVASION BY BENEFICIARIES AND IS MORE CONCERNED WITH ITS RULES AND GUIDELINES APPLIC ABLE TO LISTED ENTITIES AND TRADING IN THOSE SCRIPS. FURTHER AS MENTIONED EARLI ER, WHEN THERE ARE CUSTOMERS FOR BOTH BOGUS LOSSES AND GAINS, CASH IS NOT REQUIR ED TO ENTER THE SYSTEM EXPLICITLY AND HENCE IT IS FUTILE TO SEEK SUCH EVIDENCE. 7.28.THE APPELLANT HAS TRIED TO DISTINGUISH THE JUR ISDICTIONAL HIGH COURT DECISION IN THE CASE OF SANJAY B JAIN ON FACTS BUT IN MY VIEW T HE ESSENTIAL RATIONALE AND OBSERVATIONS ARE CLEARLY APPLICABLE TO THE CASE AT HAND. THE APPELLANT HAS ALSO MADE A REFERENCE TO OTHER LISTED SHARES WHERE THERE WERE SIGNIFICANT INCREASE IN PRICES TO SUGGEST THAT IT IS NOT ABNORMAL TO HAVE L ARGE GAINS. HOWEVER, HERE AGAIN THE APPELLANT HAS NOT FURNISHED THE CORPORATE ANNOU NCEMENTS, SIGNIFICANT IMPROVEMENT IN WORKING AND OTHER DEVELOPMENTS THAT COULD HAVE LED TO SUCH INCREASE IN PRICE. IT COULD AS WELL BE THE CASE THA T SOME OF THOSE SHARES WERE ALSO USED FOR MANIPULATION. WHAT MUST NOT BE LOST SIGHT OF IS THAT THE APPELLANT HAS ABSOLUTELY NOTHING TO EXPLAIN HIS TIMING AND THE HU MUNGOUS RETURNS CLAIMED ON HIS INVESTMENTS. FURTHER, EXTENSIVE INVESTIGATIONS HAVE SHOWR THESE SCRIPS TO BE PENNY STOCK USED TO GENERATE BOGUS LTCG BY OPERATOR S, WHICH CANNOT BE IGNORED. 7.29. THE APPELLANT HAS ARGUED THAT IT WAS JUST LUC KY AND TOOK ADVANTAGE OF SHARP UNPRECEDENT APPRECIATION IN PRICE OF THE SHARES. I FIND THE ARGUMENT SPECIOUS AND LACKING CREDIBILITY. FIRSTLY, SHARES WERE ACQUIRED THROUGH PRIVATE PLACEMENT. THIS BY ITSELF MEANS THAT THE PURCHASER HAS REASON TO BE LIEVE THAT PRICES WILL GO UP AND THERE ARE GOOD REASONS FOR THE SAME. THE APPELLANT HAS NOT FURNISHED AN IOTA OF MATERIAL TO SUPPORT SUCH BELIEF. IN FACT IT HAS NOT EVEN BOTHERED TO FOLLOW THE FINANCIALS OF THE INVESTEE COMPANIES, AS SEEN FROM THE ANSWERS TO QUESTIONS IN THIS REGARD IN THE STATEMENTS RECORDED. IT IS FURTHER TO BE NOTED THAT PREFERENTIAL ALLOTMENT MEANS THAT SHARES ALLOTTED CANNOT BE SOLD FOR ONE YEAR. THUS IT CANNOT BE THE CASE THAT SOMEONE PURCHASED SHARES AND SOLD IT SHORTLY, TAKING A FREE RIDE. SECONDLY, IT IS AGAIN NOT CREDIBLE THAT SHARES WERE SOLD AT NEAR PEAK JUST BEFORE THE PRICES FELL. SUCH TIMING IS AGAIN OUT OF ORDINARY. THIRDLY, TO SELL THE SHARES THERE MUST BE CORRESPONDING BUYERS. THE TRADES ARE MATCHE D WITH PRECISION. A PERSON NOT IN THE KNOW AND WITHOUT PRIOR UNDERSTANDING WIL L NOT BE ABLE TO OFFLOAD SUCH LARGE NUMBER OF SHARES, AS IS THE CASE OF THE APPEL LANT. FOURTHLY, SUCH PHENOMENAL PRICE RISE IS IN SCRIPS WITH NO INTRINSIC WORTH AND PERFORMANCE TO SPEAK OF. LASTLY, IT ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 17 IS UNBELIEVABLE THAT THIS SUPERLATIVE GAINS WERE AC HIEVED NOT IN JUST ONE SCRIP, BUT SEVERAL SCRIPS WITHOUT FAIL. HENCE THIS CONTENTION OF THE APPELLANT IS REJECTED. 7.30. THERE IS JUDICIAL CONSENSUS THAT STRICT RULES OF EVIDENCE DO NOT APPLY AND INCOME TAX PROCEEDINGS ARE CIVIL PROCEEDINGS WHERE PREPONDERANCE OF PROBABILITIES IS ADEQUATE TO CONCLUDE AS TO THE EXI STENCE OF FACTS UNLIKE CRIMINAL PROCEEDINGS WHERE THE FACTS HAVE TO PROVED BEYOND A NY DOUBT. 7.31. RELIANCE IS PLACED ON THE FOLLOWING JUDICIAL DECISIONS WHERE ON SIMILAR FACTS ADDITIONS IN RESPECT OF PENNY STOCKS WAS CONFIRMED. I) SANJAY BIMALCHAND JAIN V PRINCIPAL COMMISSIONER OF INCOME-TAX- 1, NAGPUR [2018] 89 TAXMANN.COM 196 (BOMBAY) II) SHRI ABHIMANYU SOIN V ASSTT COMMISSIONER OF INC OME TAX CIRCLE- VII , LUDHIANA- 2018-TIOL-733-ITAT-CHD ITA NO.951/CHD/2016 III) CHANDAN GUPTA V COMMISSIONER OF INCOME-TAX, LU DHIANA- [2015] 54 TAXMANN.COM 10 (PUNJAB & HARYANA) IV) I.T.A. NO.4906/MUM/2011 ITO-19(3)(4) V SHAMIM M . BHARWANI NOOR-E- REHMANT, V) ACIT V SOM NATH MAINI -[2006] 7 SOT 202 (CHD.) VI) I.T(SS).A.NOS. 95 & 96/IND/20IL AND I.T(SS).A.N OS. 98 TO 101/IND/2011 ACIT V SHRI NEERAJ PANJWANI, VII) ITA NO.1723/BANG/2018 SMT M. K. RAJESHWARI, V THE INCOME-TAX OFFICER, WARD-3, RAICHUR VIII) I.T.A. NO. 1413/CHNY/2018 M/S. PANKAJ AGANVA L A SONS (HUF),V THE INCOME TAX OFFICER, NON-CORPORATE WARD - 10(3), CHE NNAI IX) I.T.A. NO. 1648 SB 1649/PUN/2015 RAJKUMAR B. AG ANVAL VS DCIT CENTRAL CIRCLE 1(2). 7.32. IN LIGHT OF THE FACTS OF THIS CASE AND REASON S ELABORATED ABOVE, GROUNDS OF APPEAL NO 4 IS DISMISSED. THE ADDITION M ADE OF RS. 16,82,26,7287- IS UPHELD. 7. THE LD. A.R. VEHEMENTLY SUBMITS THAT THE ASSESS EE IS A REGULAR INVESTOR AND MAKES INVESTMENTS THROUGH REGI STERED BROKERS AND THUS CARRIES OUT PURCHASE AND SALE OF EQUITY SHARES ON RECOGNIZED STOCK EXCHANGE ON THE SCREEN BASED ONLINE PLATFORM. THIS FACT IS UNDISPUTEDLY ACCEPTED BY THE LD. AO IN THE IMPUGNED ASSESSMENT ORDER IN PARA 2, PAGE 2 OF A.O. THE LD AR ALSO REFERS TO PAGE NO.157 IN THE PAPER BOOK FOR ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 18 DETAILS OF YEAR WISE INVESTMENTS AND ACTIVITY OF IN VESTMENTS CARRIED OUT BY THE APPELLANT FOLLOWED BY TRANSACTIO N STATEMENTS OF INVESTMENT ACTIVITIES WHICH ARE FILED IN PAPER B OOK PAGE NO. 158 TO 197. THE LD AR SUBMITS THAT THIS STATEMENTS DEPICTS AND PROVES THAT THE ASSESSEE HOLDS INVESTMENTS IN MORE THAN 65 SCRIPTS AND HAS REGULARLY BEEN INVESTING IN STOCK M ARKET. SIMILARLY THE OTHER FAMILY MEMBERS ALSO MAKE INVEST MENT IN STOCK MARKET AS PER SUPPORT AND GUIDANCE OF SHRI VIN OD L GADHIYA AND THE STATEMENTS OF INVESTMENTS IN THE CA SE OF ALL THE OTHER FAMILY MEMBERS ARE ALSO PLACED IN THE PAP ER BOOKS OF RESPECTIVE APPELLANTS ALONG WITH RELEVANT TRANSACTI ON STATEMENTS. THE LD AR EMPHASIZED THAT AT THIS STAGE IT IS ESSENTIAL TO NOTE THAT NO INCREMENTING DOCUMENTS WH ATSOEVER WERE FOUND, SEIZED OR IMPOUNDED PERTAINING IN RESPE CT OF CLAIM OF EXEMPTION U/S 10(38) OF THE ACT ON LONG TERM CAP ITAL GAIN CLAIMED BY THE ASSESSEE AND HIS FAMILY MEMBERS DUR ING THE SEARCH PROCEEDINGS. THE APPELLANT AND HIS FAMILY ME MBERS MADE INVESTMENTS IN EQUITY SHARES OF SOME OF THE LI STED COMPANIES DURING THE RELEVANT FINANCIAL YEAR AS PER THEIR REGULAR PRACTICE IN PREFERENTIAL ALLOTMENT OF SHAR ES BY SUBSCRIBING THROUGH ACCOUNT PAYEE CHEQUES FROM REGU LAR BANKING ACCOUNT AND ACCORDINGLY ALLOTTED SHARES OF LISTED PUBLIC LIMITED COMPANIES AND ALSO PURCHASED SHARES ONLINE IN THE PROCESS OF SCREEN BASED TRADING ACTIVITY FROM T HE OPEN MARKET. THE LD AR SUBMITS THAT EVERY LISTED PUBLIC LIMITED COMPANY HAS TO CARRY OUT AND COMPLY ALL NECESSARY P ROCEDURES, COMPLIANCES LAID DOWN UNDER THE SEBI REGULATIONS AN D THE LISTING AGREEMENT OF STOCK EXCHANGE BEFORE ALLOTMEN T OF SHARES IN FAVOR OF APPLICANTS UNDER PREFERENTIAL ALLOTMENT . ALL THE ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 19 CONDITIONS FOR CLAIMING EXEMPTION U/S 10(38) OF THE ACT ARE FULLY SATISFIED BY THE ASSESSEE AND ALL HIS FAMILY MEMBERS FROM TIME TO TIME WHILE CLAIMING THE EXEMPTION IN THE IN COME TAX RETURNS FOR THE RELEVANT ASSESSMENT YEARS UNDER APP EAL. THE DATES OF PURCHASE/ALLOTMENT OF EQUITY SHARES, MODE OF PAYMENT OF PURCHASE BEING BY ACCOUNT PAYEE CHEQUES ONLY, PE RIOD OF HOLDING, DATES OF SALES OF EQUITY SHARES THROUGH TH E ONLINE SCREEN BASED TRADING ON THE BOLT PLATFORM OF STOCK EXCHANGE, IDENTIFICATIONS AND DETAILS OF SEBI AND STOCK EXCHA NGE REGISTERED REPUTED BROKERS THROUGH WHOM SALES OF SH ARES WERE MADE NAMELY INDIA ADVANTAGE SECURITIES LIMITED, ANA ND RATHI SHARES AND STOCK BROKER LTD, TRANSACTION RELATED EX PENSES SUCH AS BROKERAGE, SERVICE TAX, STT, STAMP DUTY, EXCHANG E AND SEBI TURNOVER CHARGES ETC ARE ALREADY ON RECORDS OF THE REVENUE AND ALSO FORMS PART OF ASSESSMENT ORDER AND CIT(A)S OR DER IN CASE OF RESPECTIVE APPELLANTS OF GADHIYA FAMILY. THE LD AR SUBMITS THAT THE LD. AO IN THE IMPUGNED ASSESSMENT ORDERS H AS REJECTED THE CLAIM OF EXEMPTION U/S 10(38) OF THE A CT AND MADE ADDITIONS OF THE ENTIRE SALE PROCEEDS OF SHARES AS UNEXPLAINED CREDIT U/S 68 OF THE ACT, ALLEGING THAT THE APPELLA NT HAS ARRANGED BOGUS LTCG BY TRADING IN PENNY STOCK COMPA NIES IN HIS NAME AND IN THE NAME OF HIS FAMILY MEMBERS BASE D ON FOLLOWING I) INVESTIGATION REPORT OF DIRECTORATE OF INVESTIGATION WING, KOLKATA; II) ALLEGED BOGUS LTCG RESULTING FR OM STEEP MOVEMENT OF SHARE PRICES ETC DETAILED IN THE ASSESS MENT ORDER.; III) STATEMENTS RECORDED BY THE DIRECTORATE OF INVE STIGATION WING, KOLKATA OF VARIOUS PARTIES NAMELY SAJJAN DAMODAR PR ASAD KEDIA, JAGDISH PUROHIT, MANOJ KUMAR AGARWAL, RAJKUM AR KEDIA AND SOUMEN CHOUDHURY ETC; IV) ALLEGED PARTIES RELAT ED TO RED ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 20 FORD GLOBAL LIMITED, DEPOSITING OF CASH IN SOME OF THE BANK ACCOUNTS, LISTING THEM AS EXIT PROVIDERS ETC.. THE LD AR SUBMITS THAT IN ESSENCE THE ENTIRE ADDITION IS BASED ON PR EPONDERANCE OF POSSIBILITIES, CIRCUMSTANTIAL EVIDENCES AND NOT BASED ON JUSTIFIABLE/CLINCHING EVIDENCES, HUMAN CONDUCT IN G ENERAL AND NOT SPECIFIC FINDINGS OR ALLEGATIONS ON THE ASSESS EE AND HIS FAMILY MEMBERS. THERE ARE SEVERAL JUDICIAL PRONOUNC EMENTS OF JURISDICTIONAL ITAT AND HIGH COURTS WHEREIN IT HAS BEEN CATEGORICALLY HELD THAT ADDITION BASED ON SUCH GENE RAL HYPOTHESIS CANNOT BE MADE. THE LD AR SUBMITS THAT D URING THE COURSE OF INVESTIGATION PROCEEDINGS THAT STATEMENT S OF APPELLANTS AND HIS FAMILY MEMBERS WERE RECORDED BY THE INVESTIGATION DEPARTMENT WHICH ARE EXTRACTED IN TH E RELEVANT ASSESSMENT ORDER ON PAGE 46 TO 58 AND PAGE 111 TO 1 18 AND NONE OF THE FAMILY MEMBERS OF THE ASSESSEE AND HE HIMSELF HAVE MADE ANY CONFESSION, ACCEPTANCE OR AFFIRMATION S IN THEIR RESPECTIVE STATEMENTS WHICH CAN RESULT INTO DENIAL OF CLAIM OF EXEMPTION U/S 10(38). 7.1. THE LD AR ALSO CONTENDED THAT DURING THE COURS E OF ASSESSMENT PROCEEDINGS AND APPELLATE PROCEEDINGS BE FORE CIT(A), THE APPELLANT FILED ALL DOCUMENTS FOR ESTA BLISHING BONAFIDE AND GENUINENESS OF CLAIM OF EXEMPTION U/S 10(38) OF THE ACT. BESIDES ALL THE OTHER FAMILY MEMBERS OF TH E ASSESSEE HAVE ACCEPTED THE AVERMENTS MADE IN THE STATEMENT OF THE ASSESSEE. THE LD AR SUBMITS THAT ON GOING THROUGH T HE STATEMENT OF THE APPELLANT AND HIS FAMILY MEMBERS, IT CAN BE APPRECIATED BEYOND DOUBT THAT THE COMPLETE TRAIL OF PREFERENTIAL ALLOTMENT BASED INVESTMENTS AND/OR ONLINE PURCHASE OF SHARES ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 21 ON SCREEN BASED TRADING ACTIVITY OF THE BOMBAY STOC K EXCHANGE, DOCUMENTS RELATED TO PURCHASES, PROOFS AND SOURCE O F MONEY FOR PURCHASE OF SHARES BY ACCOUNT PAYEE CHEQUES, SP LITTING OF SHARES INTO LOWER DENOMINATION, RECEIPT OF BONUS SH ARES IN SOME OF THE CASES, EARNING OF DIVIDEND INCOME, SALE OF SHARES, NAME OF BROKERS THROUGH WHOM SHARES WERE SOLD IN TH E OPEN MARKET PAYING STT ON SCREEN BASED TRADING ACTIVITY OF THE STOCK EXCHANGE ETC AT LENGTH. ALL THIS DOCUMENTARY EVIDEN CES IN CASE OF THE APPELLANT AND ALL HIS FAMILY MEMBERS FOR THE RESPECTIVE ASSESSMENT YEAR ARE ON RECORD BEFORE THE AUTHORITIE S BELOW. THEREFORE, THE DENIAL OF CLAIM OF EXEMPTION MADE BY THE LD. AO IGNORING THE RELEVANT AND FACTUAL DOCUMENTARY EVIDE NCES FILED BY THE APPELLANT IS ABSOLUTELY IMPROPER AND AGAINST THE PRINCIPLE OF NATURAL JUSTICE AND EQUITY. 7.2. THE LD AR, WHILE REFERRING TO THE ASSESSMENT O RDER, SUBMITS THAT NONE OF THE DESCRIPTIONS, ALLEGATIONS , OBSERVATIONS, FINDINGS, STATEMENTS REPRODUCED ETC I N THE IMPUGNED AO AS MENTIONED IN PARA 9, 10 AND 11 PAGE NO. 9 TO 45 AND PARA 13, PAGE NO. 64 TO 94 OF THE IMPUGNED A SSESSMENT ORDER ARE RELEVANT OR HAVING ANY COGENT, COLLABORA TIVE, IDENTIFIABLE OR CLINCHING TO THE LTCG REALIZED BY T HE APPELLANT AND HIS FAMILY MEMBERS IN THE REGULARLY CARRIED OUT INVESTMENT ACTIVITIES OF SHARES AND SECURITIES DURING THE RELE VANT ASSESSMENT YEARS UNDER THE APPEAL. THE LD AR SUBMIT S THAT THE APPELLANT HAD NEVER TRANSACTED WITH ANY OPERATOR OR SUCH INTERMEDIARY IN THE PROCESS OF CARRYING OUT INVESTM ENTS AND FURTHER THAT THE ALLEGED OPERATORS AND THEIR RECORD S DO NOT IN ANY MANNER MENTION ANY CONNECTION WITH APPELLANT AN D HIS ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 22 FAMILY MEMBERS. THE LD AR SUBMITS THAT THE SHARES W ERE DULY ALLOTTED TO THE APPELLANT AND WERE RECORDED INTO TH E DEMAT ACCOUNT UPON SUCH PURCHASE/ALLOTMENT. SHARES WERE S OLD ON BSE THROUGH REGULAR REGISTERED BROKERS OF ASSESSEE UNDER SCREEN BASED TRADING WHERE THE SELLER AND BUYER OF SHARES ARE WHOLLY UNAWARE OF THE IDENTITY OF THE OTHER PERSON. STTS WERE PAID AT THE TIME OF SALE OF SHARES AND PROCEEDS WER E RECEIVED INTO BANK ACCOUNTS OF THE ASSESSEE ONLY THROUGH PRO PER BANKING CHANNEL. THE LD AR ALSO EXPLAINED THE FUNCT IONING OF THE STOCK EXCHANGE BY REFERRING TO AN EXPLANATORY NOTE ON FUNCTIONING OF STOCK EXCHANGE ACTIVITY ON PAGE NO. 156 OF PAPER BOOK SO AS TO EXPLAIN HOW THE PURCHASE AND SALE ACT IVITY ON ONLINE PLATFORM OF STOCK EXCHANGE IS CARRIED OUT TH ROUGH CLEARING SYSTEM. 7.3. THE LD AR SUBMITS THAT BASED ON INQUIRY AND I NVESTIGATION OF WING, THE AO HAS SURMISED THAT ASSESSEE AND HIS FAMILY MEMBERS ROUTED HIS BLACK MONEY WITHOUT ESTABLISHING ANY MONEY TRAIL. THE LD AR ARGUED THAT THE LD. AO HAS HOPELESSLY FAILED TO ESTABLISH THAT THE APPELLANT OR HIS FAMIL Y MEMBERS HAS PAID ANY UNACCOUNTED MONEY TO ANY OF THE PARTIES RE FERRED BY THE LD. AO IN THE IMPUGNED AO. NONE OF THE REPLIES TO THE QUESTIONS OF SUCH PARTIES INDICATES THAT THEY HAVE RECEIVED ANY UNACCOUNTED MONEY FROM THE ASSESSEE OR HIS FAMILY M EMBERS AT THE TIME OF SELLING OF THESE EQUITY SHARES BY TH E ASSESSEE. THE FINDINGS OF THE INVESTIGATION WING OF THE REVENUE ARE GENERAL IN NATURE AND IT IS BASICALLY A STUDY REPORT AND NOT S PECIFICALLY MENTIONING WHICH CASES ARE INVESTIGATED. THE LD AR ARGUES THAT NOWHERE IN THE ASSESSMENT ORDER, THE AO HAS ES TABLISHED ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 23 ANY LINKAGE BETWEEN THE REPORTS OF THE INVESTIGATI ON WING AND ASSESSEE'S TRANSACTIONS. MOREOVER THE ASSESSEE WAS NOT CONFRONTED WITH THE INVESTIGATION REPORT WHICH WAS RELIED BY THE AO. THE AR STRONGLY ARGUED THAT THIS IS A FATA L AND INCURABLE MISTAKE ON THE PART OF THE AO AND CAN NO T BE RECTIFIED AS RELIANCE ON SUCH INVESTIGATION REPORT, WITHOUT CONFRONTING THE ASSESSEE WITH THE SAME, RENDERS THE ASSESSMENT FRAMED AS BAD IN LAW. THE INVESTIGATION IN ASSESSEE'S CASE BY WAY OF SEARCH DID NOT REVEAL ANY CONNECTION WITH THE FINDINGS OR EVIDENCES AS REFERRED TO IN SU CH REPORTS. THE LD AR IN DEFENSE OF HIS ARGUMENTS RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF ADAMINE CONSTRUCTION PVT. LTD. 99 TAXMANN 45 WHEREIN WHILE DISMISSING THE APPEAL, THE HONBE COURT HAS REFERR ED TO OBSERVATIONS OF DELHI HC THAT WHAT IS EVIDENT IS THAT THE AO WENT BY ONLY THE REPORT RECEIVED AND DID NOT MAKE T HE NECESSARY FURTHER ENQUIRIES SUCH AS INTO THE BANK ACCOUNTS O R OTHER PARTICULARS AVAILABLE WITH HIM BUT RATHER BASED THE ENTIRE FINDINGS ON THE REPORT, WHICH CANNOT BE CONSIDERED AS PRIMARY MATERIAL. THE ASSESSEE HAD DISCHARGED THE ONUS INIT IALLY CAST UPON IT BY PROVIDING THE BASIC DETAILS WHICH WERE N OT SUITABLY ENQUIRED INTO BY THE AO. 7.4. THE LD AR SUBMITS THAT THE LD. AO PLACED RELIA NCE ON STATEMENTS OF SEVERAL THIRD PARTIES WITHOUT PROVIDI NG OPPORTUNITIES FOR CROSS EXAMINATION WHICH IS CONTR ARY TO THE DECISION OF HONBLE SUPREME COURT IN M/S ANDAMAN TI MBER INDUSTRIES V/S CCE (CA NO.4228 OF 2006) WHEREIN IT W AS HELD THAT NOT ALLOWING THE ASSESSEE TO CROSS-EXAMINE THE WITNESSES ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 24 BY THE ADJUDICATING AUTHORITY WHEREAS THE STATEMEN T OF THOSE WITNESSES WERE MADE THE BASIS OF THE IMPUGNED ORDER IS A SERIOUS FLAW WHICH MAKES THE ORDER NULLITY IN AS MU CH AS IT AMOUNTS TO VIOLATION OF PRINCIPAL OF NATURAL JUSTIC E BECAUSE OF WHICH THE ASSESSEE WAS ADVERSELY AFFECTED. THE WHOL E BASIS OF MAKING THE ADDITION IS THIRD PARTY STATEMENT WITHOU T THERE BEING ANY TANGIBLE MATERIAL. THE LD. AR SUBMITS THA T IT IS TRITE LAW THAT ADDITIONS MERELY ON THE BASIS OF SUSPICIOU S, CONJECTURES OR SURMISES COULD NOT BE SUSTAINED IN T HE EYES OF LAW AS HELD BY HONBLE SUPREME COURT IN OMAR SALAY MOHAMED SAIT V/S CIT (1959 37 ITR 151). THE SUSPICION HOWEVE R STRONG COULD NOT PARTAKE THE CHARACTER OF LEGAL EVIDENCE A S HELD BY HONBLE SUPREME COURT IN UMACHARAN SHAW & BROS. V/S CIT (1959 37 ITR 271). 7.5. THE LD AR SUBMITS THAT THE LD. AO HAS NOT MADE ANY ALLEGATION OF COMMISSION PAYMENT AND HENCE NO ADDIT ION U/S 69C OF THE ACT WAS MADE. THE LD AR SUBMITS THAT THE ASSESSEE ALSO IN REPLY TO QUESTION NO. 44, PAGE 51 OF THE AO HAS STATED THAT NO COMMISSION PAYMENT WAS MADE BY HIM WHICH IS NOT DISPUTED BY THE INVESTIGATION WING AND THE LD. AO. SINCE APPELLANT AND HIS FAMILY MEMBERS ARE PURCHASING AND SELLING SHARES ONLINE THROUGH SCREEN BASED PLATFORM SO THER E IS NO RELATIONSHIP WITH BUYER OR SELLER OF THE SHARES. TH ERE IS NO MENTION OF ANY NAME OF APPELLANT OR HIS FAMILY MEMB ERS IN THE EVIDENCES GATHERED BY THE DEPARTMENT AND UNPROVEN HYPOTHESIS ELABORATELY DISCUSSED BY THE AO IN THE I MPUGNED ASSESSMENT ORDER. ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 25 7.6. THE LD AR SUBMITS THAT NONE OF THE ALLEGED PAR TIES SUCH AS BROKERS, OPERATORS, DIRECTORS, EXIT PROVIDERS ETC W HOSE STATEMENTS WERE RECORDED BY THE INVESTIGATION WING KOLKATA MENTIONS NAME OF THE APPELLANT AND/OR ANY OF HIS FA MILY MEMBERS. REFERENCE TO SEBI ORDER IN THE IMPUGNED AS SESSMENT ORDER IS OF NO CONSEQUENCES TO THE INCOME TAX PROCE EDINGS WHICH IS DIFFERENT CODE IN ITSELF AND NONE OF THE O RDERS OF SEBI REFERS TO NAME OF THE APPELLANT AND ANY OF HIS BROK ERAGE HOUSE. SEBI ORDERS ARE INTENDED TO PROTECT THE INTEREST OF THE INVESTORS AND THEY ARE NOT THE DETERMINING FACTOR FOR ESTABLI SHING THE TAX CONSEQUENCES OF ANY TRANSACTION OF PURCHASE AND SAL ES. ALLOTMENT AND/OR ONLINE PURCHASE OF SHARES OF VARIO US COMPANIES HAS NEVER BEEN OBJECTED OR DISPUTED BY SEBI/ROC/SE IN THE GIVEN CASE OF APPELLANT AND HIS FAMILY MEMBERS. 7.7. THE LD AR SUBMITS THAT MOVEMENT IN PRICES OF S HARES IS GOVERNED BY SEVERAL FACTORS WITHOUT THERE BEING ANY NEXUS TO THE PROJECTS, PROJECTION ETC AND THIS FACT GETS CLE ARLY ESTABLISHED IF ONE REFERS TO THE PRESENT MOVEMENT IN SHARES OF SEVERAL COMPANIES. THE LD. AO HAS FAILED TO ESTABLISH ANY L INK TO THE PROCESS OF RIGGING AND MANIPULATING OF PRICES OF S HARES IN CONNIVANCE WITH PARTIES WHOSE NAMES ARE MENTIONED I N THE IMPUGNED ASSESSMENT ORDERS. 7.8. THE LD AR ALSO ARGUES THAT THE PROVISIONS OF S ECTION 68 OF THE INCOME TAX ACT, 1961 DEALS WITH A CASE, WHERE A NY SUM FOUND CREDITED IN THE BOOKS OF ACCOUNTS OF AN ASSES SEE IN ANY FINANCIAL YEAR AND ASSESSEE OFFERS NO EXPLANATION A BOUT THE NATURE AND SOURCE OR EXPLANATION OFFERED BY THE ASS ESSEE IS NOT ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 26 SATISFACTORY IN THE OPINION OF THE AO, THEN SUM CRE DITED MAY BE CHARGED TO TAX FOR THAT ASSESSMENT YEAR U/S 68 OF T HE ACT WHICH IS NOT THE CASE OF THE ASSESSEE. THE ASSESSEE HAS R ECEIVED CONSIDERATION FROM SALE OF SHARES ON WHICH HE HAS M ADE LTCG AND FURNISHED ALL EVIDENCES BEFORE THE AUTHORITIES BELOW AS HAS BEEN HELD BY THE COORDINATE BENCH IN THE CASE OF SH RI KUNAL DEDHIA ITA NO. 3893/MUM/2019. THE LD AR RELIED ON T HE FOLLOWING DECISIONS: A. SHRI VIJAYRATTAN BALKRISHAN MITTAL VS DCIT (ITA NO. 3429/MUM/2019) (MUMBAI ITAT) B. SHRI KUNAL DEDHIA VS DCIT (ITA NO. 3893/MUM/2019) ( MUMBAI ITAT) C. MUKESH B SHARMA VS ITO (ITA NO. 6249/MUM/2018) (MUM BAI ITAT) D. DIPESH RAMESH VARDHAN VS DCIT (ITA NO. 7648/MUM/201 9) (MUMBAI ITAT) E. CIT VS SHYAM R. PAWAR (2015) 54 TAXMANN.COM 108 (BO MBAY HIGH COURT) F. CIT VS SHRI MUKESH RATILAL MAROLIA (ITA NO.456 OF 2 007) (BOMBAY HIGH COURT) G. CIT VS SMT. JAMNADEVI AGRAWAL (2012) 20 TAXMANN.CO M 529 (BOMBAY HIGH COURT) H. GATEWAY LEASING PVT. LTD. VS ACIT WRIT PETITION NO. 2518 OF 2019 (BOMBAY HIGH COURT) I. ITO VS M/S ARVIND KUMAR JAIN HUF ITA NO.4862/M/201 4 (MUM-TRIB.) J. SHRI SUNIL PRAKASH VS ACIT ITA NO.6494/M/2014 (MUM BAI ITAT) K. ITO VS MRS. RASILA N GADA ITA NO.1773/M/2010 & ORS (MUMBAI ITAT) L. ACIT VS SMT. POOJA ARORA ITA NO.2788/M/2009 & ORS. (MUMBAI ITAT) M. SMT ANJLI PANDIT VS ACIT ITA NO.3028 TO 3032/M/2011 & ORS. (MUMBAI ITAT) N. ACIT VS SHRI L. JAIPAL REDDY ITA NO.3607 & 3608/M/2 009 (MUMBAI ITAT) O. MS. FARRAH MARKER VS ITO ITA NO.3801/M/2011 (MUMBAI ITAT) P. MAYUR M. SHAH (HUF) VS ITO ITA NO.2390/M/2013 (MUMB AI ITAT) Q. MR. ARVIND ASMAL MEHTA VS ITO ITA NO.2799/M/2015 (M UMBAI ITAT) R. ITO VS M/S INDRAVADAN JAIN HUF ITA NO.4861/M/2014 ( MUMBAI ITAT) S. MR. RAMPRASAD AGARWAL VS ITO ITA NO.4843/M/2018 & O RS. (MUMBAI ITAT) T. SHRI MUKESH B SHARMA VS. ITO ITA NO.6249/M/2018 (MU MBAI ITAT) 7.9. THE LD AR ALSO DISTINGUISHED THE DECISION REL IED UPON BY THE LD. AO AND LD. CIT(A) AS FOLLOWS: I) LD. AO HAS PLACED RELIANCE ON THE JUDICIAL PRONO UNCEMENT OF HERSH WIN CHADHA VS DCIT (DELHI ITAT) AND HAS RES ORTED TO ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 27 PREPONDERANCE OF POSSIBILITIES BY MAKING ADDITIONS. THE SAID JUDGMENT IS IN CONTEXT OF BOFORS DEAL IN WHICH SEVE RAL GOVERNMENT AGENCIES SUCH AS CBI, IB, R&AW, NATIONAL DEFENSE ETC PRODUCED VARIETY OF EVIDENCES WHERE AS IN THE G IVEN CASE OF THE APPELLANT EXCEPT THE UNPROVEN HYPOTHESIS THE LD . AO HAS FAILED TO ESTABLISH THE ALLEGATIONS MADE WITH REGAR D TO LTCG BEING BOGUS WITH ANY CORROBORATIVE, JUSTIFIABLE AND CLINCHING EVIDENCES AGAINST THE APPELLANT. II) THE LEARNED AO HAS ALSO PLACED RELIANCE ON THE JUDGMENT OF SUMATI DAYAL ON HUMAN PROBABILITIES. IT IS ESSEN TIAL TO NOTE THAT THE SAID JUDGMENT PERTAINS TO THE SOURCE OF IN COME WITH REGARD TO HORSE RACING ACTIVITY BEFORE NEARLY 40 YE ARS FOR THE A.Y. 1972-1973 WHEN THE SYSTEM BASED ELECTRONICALLY BACKED ONLINE DOCUMENTARY EVIDENCES WERE NOT AVAILABLE. TH EREFORE, THE CONCEPT OF HUMAN PROBABILITIES WAS LAID DOWN. IN TH E PRESENT TIME SYSTEM BASED EVIDENCES ARE AVAILABLE AND THERE FORE THESE JUDGMENTS ARE NOT RELEVANT WHEN THE SYSTEM BASED TH IRD PARTY EVIDENCES ARE READILY AVAILABLE REGULATED BY THE GO VERNMENT AUTHORITIES. THIS JUDGMENT WITH DUE RESPECT HAS LOS T ITS RELEVANCE IN THE PRESENT TIME WITH EVALUATION OF TE CHNOLOGY AND AVAILABILITY OF DOCUMENTS FROM REGULATORY AUTHORITI ES IN THE GIVEN CASE STOCK EXCHANGE, SEBI ETC. III) IN SIMILAR MANNERS, IN THE CASE OF DURGA PRASA D MORE WHICH IS PERTAINING TO A.Y. 1958-59 PERTAINING TO CONVEYA NCE OF DOCUMENTS, HOUSE PROPERTY INCOME, IN WHOSE NAME INC OME SHOULD BE TAXED ETC WHEN EVIDENCE OF ONLINE RECORDI NG OF DOCUMENTS WERE NOT AVAILABLE AND ACCORDINGLY WITH D UE RESPECT ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 28 THIS JUDGMENT HAS ALSO LOST ITS RELEVANCE IN THE PR ESENT TIME OF TECHNOLOGICAL EVALUATION. IV) THE JUDGMENT OF CIT VS P MOHANKAKA IS IN THE C ONTEXT OF SCOPE OF SECTION 68 OF THE ACT. THE HONBLE MUMBAI ITAT IN CASE OF KUNAL DEDHIA (SUPRA) IN PARA 22 OF THE SAID JUDG MENT HAS CATEGORICALLY HELD THAT SECTION 68 IS NOT APPLICABL E IN CONTEXT OF DENIAL OF CLAIM OF EXEMPTION U/S 10(38) OF THE ACT. V) THE FACTS AND MERITS IN THE CASE OF USHA CHNADRE SH SHAH ITA NO. 6858/MUM/2011 ARE COMPLETELY DISTINGUISHABL E WITH THAT OF THE CASE OF APPELLANT. IN THE CASE OF USHA CHANDRESH SHAH THE ASSESSEE COULD NOT PRODUCE THE COPIES OF S HARE CERTIFICATES AND COPIES OF SHARE TRANSFER FORMS. TH E TRANSACTION OF PURCHASE OF SHARES COULD NOT BE CROSS VERIFIED. THE SHARES OF M/S PRIME CAPITAL MARKETS LTD WAS DECLARED AS PENN Y STOCK BY SEBI AND THE BROKER SANJU KABRA, THROUGH WHOM TH E SHARES WERE SOLD BY THE ASSESSEE WAS INDICTED FOR MANIPULA TING THE PRICES OF PENNY STOCK SHARES. THEREFORE, THIS JUDGM ENT IS NOT RELEVANT IN THE CONTEXT OF PRESENT APPEALS. VI) ARVIND M KARIYA VS ACIT ITA NO. 7027/MUM/2010 I S DIRECTION FOR SET ASIDE MATTER FOR AFRESH REVIEW BY THE ASSESSING OFFICER AND THERE ARE NO CONCLUSIVE FINDINGS OF THE HONBLE COURT AND THEREFORE, IT IS NOT RELEVANT. VII) IN THE CASE OF SOMANTH MANI VS ITO THE PROPOSI TION OF HUMAN PROBABILITIES IS ADVANCED. HOWEVER, AS EXPLAI NED IN THE PRECEDING PARAGRAPH WHEN DOCUMENTARY EVIDENCES ARE AVAILABLE ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 29 IN ABUNDANCE DULY VERIFIED BY THIRD PARTY THE CONCE PT OF HUMAN PROBABILITIES LOSES ITS SIGNIFICANCE. VIII) THE JUDGMENT OF SANJAY BIMALCHAND JAIN (BOMBA Y HC) IS ALSO DISTINGUISHABLE ON FACTS AND ALSO NOT RELEVANT AS (I) IN THAT CASE, THE BROKER COMPANY THROUGH WHICH THE SHARES W ERE SOLD DID NOT RESPOND TO AO'S LETTER REGARDING THE NAMES AND ADDRESS AND BANK ACCOUNT OF THE PERSON WHO PURCHASED THE SH ARES SOLD BY THE ASSESSEE (II) MOREOVER, AT THE TIME OF ACQUI SITION OF SHARES OF BOTH THE COMPANIES BY THE ASSESSEE, THE P AYMENTS WERE MADE IN CASH (III) THE ADDRESS OF BOTH THE COM PANIES WERE INTERESTINGLY THE SAME (IV) THE AUTHORIZED SIGNATOR Y AT BOTH THE COMPANIES WERE ALSO THE SAME PERSON (V) THE PURCHAS E OF SHARES OF BOTH THE COMPANIES WAS DONE BY THAT ASSES SEE THROUGH BROKER, GSSL AND THE ADDRESS OF THE SAID BR OKER WAS INCIDENTALLY THE ADDRESS OF THE TWO COMPANIES. THIS JUDGMENT WAS ALSO DISTINGUISHED BY THE HONBLE MUMBAI ITAT I N CASE OF VIJAYRATTAN BALKRISHAN MITTAL (SUPRA) IN PARA 30 PAG E 67. IX) THE FACTS IN THE CASE OF DISHA LALWANI VS ITO, ITA NO. 6398/MUM/2012 IS IN A DIFFERENT CONTEXT OF SUBSCRIP TION TO SHARE APPLICATION MONEY AND THEREFORE NOT RELEVANT IN THE PRESENT APPEALS. X) SHRI. ABHIMANYU SOIN VS ACIT ITA NO. 951/CHD/20 16 IS NOT APPLICABLE AS IN THAT CASE THOUGH THE ASSESSEE HAS RECEIVED THE AMOUNTS BY THE WAY OF ACCOUNT PAYEE CHEQUES, TH E ASSESSEE COULD NOWHERE PROVE THE PURCHASE OF SHARES AS CLAIMED TO HAVE BEEN MADE ON 02/12/2008 IN CASH AND IT WAS ALSO NOT PROVED ABOUT THE AVAILABILITY OF THE FUNDS WITH THE ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 30 ASSESSEE AS ON THE DATE OF PURCHASE OF SHARES. THE ASSESSEE WAS NOT IN INDIA AS PER THE PASSPORT DETAILS AVAILA BLE AS PER THE RECORD. THIS, COUPLED WITH THE FACT THAT THE TRANSF ER OF MONEY IN CASH FROM LUDHIANA TO DELHI AND A PERSON REPRESENTI NG THE BROKER OPERATING AT KOLKATA HAS COLLECTED THE MONEY AT DELHI CANNOT BE ACCEPTED. XI) CHNADAN GUPTA VS CIT IS ALSO NOT APPLICABLE AS I N THIS CASE IT WAS HELD THAT NO SALE OR PURCHASE OF THE SH ARES WAS DONE BY THE ASSESSEE BUT ONLY ENTRIES OF THE CAPITA L GAINS WERE GIVEN TO THE ASSESSEE ON RECEIPT OF CASH PAYMENT. I T WAS RECORDED THAT SINCE THE ASSESSEE HAD ONLY FILED COP Y OF SALE AND PURCHASE BILL AND SHOWED INABILITY TO PRODUCE THE B ROKER, THE ASSESSING OFFICER WAS RIGHT IN CONDUCTING THE ENQUI RIES ON HIS OWN. FURTHER, THE BOGUS CAPITAL GAINS HAVE BEEN GEN ERATED BY THE ASSESSEE AND, THEREFORE, THE QUOTATIONS IN A DI ARY WAS OF NO HELP TO THE ASSESSEE. FROM A PERUSAL OF QUESTIONS A ND ANSWERS, IT APPEARED THAT THE ASSESSEE HAD NOT DONE ANY SHAR E BUSINESS BEFORE FINANCIAL YEAR 2003-04 AND AFTER FINANCIAL Y EAR 2004-05 IN WHICH HE HAD EARNED CAPITAL GAINS OF RS. 51 LAKH S. THESE ARE NOT THE FACTS OF THE PRESENT APPEAL. XII) FURTHER FACTS IN SHAMIM M. BHARWANI NOOR-E-REH MANT, ITA 4906/MUM/2011 IS ALSO COMPLETELY DISTINGUISHABL E AS THE ASSESSEE WAS NOT A REGISTERED CLIENT OF THE BROKER. THE PURCHASE WAS IN CASH, SO THAT IT WAS NOT VERIFIABLE. THE SAI D TRANSACTION WAS NOT THROUGH THE STOCK EXCHANGE. THE SHARES WERE IN A NONDESCRIPT COMPANY, WITH NO FINANCIAL AND/OR PHYSI CAL ASSETS OF VALUE OR REPORTED EARNINGS. ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 31 XIII) ACIT VS SHRI NEERAJ PANJWANI CASE RELATED TO A CCEPTANCE OF MISCELLANEOUS APPLICATION AND THEREFORE IS NOT R ELEVANT IN THE RESENT CONTEXT. XIV) SIMILARLY M/S PANKAJ AGARWAL & SONS VS ITO IS N OT APPLICABLE TO THE FACTS OF APPELLANT CASE SINCE IN THAT CASE PLEA FOR CROSS EXAMINATION OF WITNESSES AND FURNISHING O F INVESTIGATION REPORT WAS MADE AND WHICH WERE NEVER MADE BELOW LOWER AUTHORITIES. XIV) IN CASE OF RAJKUMAR B. AGARWAL VS DCIT THE BROK ER WAS SUSPECTED IN ILLEGAL TRADING BY SEBI. COMPLETE DETA ILS INCLUDING DEMAT STATEMENT WERE NOT GIVEN BY THE ASSESSEE. THE REFORE, THE PROPOSITION OF HUMAN PROBABILITIES IS ADVANCED. HOW EVER, AS EXPLAINED IN THE PRECEDING PARAGRAPH WHEN DOCUMENTA RY EVIDENCES ARE AVAILABLE IN ABUNDANCE DULY VERIFIED BY THIRD PARTY THE CONCEPT OF HUMAN PROBABILITIES LOSES ITS SIGNIFICANCE. 7.10. FINALLY, THE LD AR PRAYED BEFORE THE BENCH THAT IN VIEW OF THE FACTS AND MERITS AND DECISIONS AS DISCUSSED ABO VE THE , THE GROUND NO. 3 MAY KINDLY BE ALLOWED. 8. PER CONTRA, THE LD DR STRONGLY REBUTTED THE ARGU MENTS AS MADE BY THE LD AR BY SUBMITTING THAT THE LTCG IS NO THING BUT OWN MONEY ROUTED INTO THE BOOKS THROUGH ACCOMMODATI ON ENTRIES AND WAS PART OF A ORGANIZED RACKET IN WHICH SEVERAL BROKERS/EXIT PROVIDERS WERE INVOLVED AS HAS BEEN BR OUGHT TO LIGHT BY THE SEARCH OPERATION BY INVESTIGATION WING OF THE DEPTT. THE LD DR SUBMITTED THAT T HIS FAMILY IS PART OF THE MILLENNIUM GROUP WHICH IS ENGAGED IN THE CONSTRUCTION ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 32 BUSINESS AND DURING THE COUR SE OF SEAR C H AND SEIZURE A C TION EVIDENCES OF RECEIPT OF ON MON EY WERE FOUND . THE MAIN REASON FOR CARRYING OUT THE SEARCH ACTION WAS THAT THE ASSESSEE AND HIS FAMILY MEMBERS HAD RECEIVED, PRE A RRANGED AND PRE CONCEIVED BOGUS LONG TERM CAPITAL GAINS BY DEALING IN SCRIPS O F PENNY STOCK COMPANIES. IT WAS GATHERED THAT THE ASSESSE E GROUP HAD INVESTED NEARLY A SUM OF RS. 3.86 CRORES, IN THE SHARES OF VERY SMALL COMPANIES, THROUGH PREFERENTIAL ROUTE (AND NOT NOR MA L STOCK EXCHANGE OPERATION) AND HAD E ARNED LONG TERM CAPITAL GAINS OF OVER RS. 74 CRORES, IN A.Y. 2014-15 AND OTHER YEARS, WHICH IS EXEMPTED FROM TAX. THE LD AR STATED THAT THE AO IN PARA 2.1 OF THE ASSESSMEN T ORDER HAS CLEARLY MENTIONED THAT CASH FUND S GENERATED FROM C ONSTRUCTION AND REAL ESTATE BUSINESS AND DIAMOND TRADING, WHICH WERE ENTERED IN THE BOOKS OF ACCOUNTS OF GADHIYA GROUP THROUGH BOGUS LONG TERM CAPITAL GAINS BY SELLING THESE PENNY STOCK. THE LD D R ARGUED THAT D URING THE COURSE OF SEARCH & SEIZURE ACTION, PLETHORA OF EVIDENCES HAVE BEEN GATHERED AGAINST CASH DEPOSITS IN THE BANK ACCOUNTS OF ENTRY OPERATORS, WHICH FACILITATED BOGUS LONG TERM CAPITAL GAINS TO THE ASSESSEE, PURCHASE OF SHARES BY THE ASSESSEE AND HIS FAMILY MEMBERS AT VERY LOW PRIC E THROUGH P REF E RENTIAL ROUTE AND NOT THROUGH NORMAL STOCK EXCHANGE OPERATION AND EVI DENCES OF GRADUAL RIGGING OF PRICES OF THESE SELECTED 7 - 8 COMPANIES THROUGH CIRCULAR TRADING AND THROUGH LOW VOLUME TRANSACTIONS. IT HAS BEEN FOUND THAT THE VALUE OF SCRIP WAS GRADUALLY RAISED SUBSTANTIALLY WITHIN A PERIOD ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 33 OF ABOUT ONE YEAR AND THE SHARES WERE SOLD THROUGH A SET O F EXIT PROVIDERS WHO MANIPULATED AND BOOK E D HUGE LOS SES . IT IS GATHERED THAT INITIALLY NATIONWIDE SEARCHES WERE CARRIED OUT BY INVESTIGATION WING, KOLKATA OF THE INCOME TAX DEPARTMENT IN DECEMBER 2014 , DURING THE COURSE OF WHICH IT WAS FOUND THAT VARIOUS PERSONS HAD RECEIVED ENTRIES OF LONG TERM CAPITAL GAINS THROUGH RIGGIN G OF SH ARES OF SMALL LISTED COMPANIES AND THE NAME OF THE PR ESE N T ASSESSEE AND HIS FAMILY MEMBERS PROMINENTLY APPEARED THEREIN. DURING THE C OURSE OF S EARCH IT WAS ACCEPTED BY THE STOCK BROKERS THAT R E LE VA NT COMPANIES WE R E BOGUS C OMPANIES (JAMA KHARCHI COMPA NIES ) A ND TH A T T H EY WER E BEING USED ONLY FOR PROVIDING ACCOMMOD A TI ON ENTR I E S . STATEMENTS OF VARIOUS ENTRY OPERATORS, DIR E CTORS OF COMPANIES WERE ALSO RECORDED WHEREIN TH E Y HAD A C CEPTED THAT TH E SE C O M PAN I ES WERE BEING USED FOR PROVIDING BOGUS LONG TERM CAPI T AL GAINS. TH E SE FACTS HAVE BEEN ELABORATELY DISCUSSED BY THE CIT(A), AND ALSO BY TH E AO, WHICH AR E THE SUB J ECT MATTER OF THE PRESENT APPEAL. 8.1. THE LD DR SUBMITS THAT SU BSE Q UENTLY INVESTIGA T ION WER E CARRIED OUT BY THE SEBI AND IT B A NNED TRADING IN SHARES OF T HESE COMPANIES VIDE ORDER DATED 19 . 12.2014 AND BANNED THE RELEVANT STOCK BROKERS ALSO VID E ORDE R DATED 0 2 . 0 6 .2016. SEBI IN ITS ORDER DATED 02.06.2016 VERY CLEA RLY H E LD T HAT TR A DING I N THE RELEVANT SCRIPS (8 COMPANIES) NAMELY COMFORT FINCAP LTD . , GLOBAL INFRAT E CH & FINANCE LTD., PINE ANIMATION LTD., SUNRIS E AS I AN LTD., PSIT INFRA AND ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 34 S E RVICES LTD., SCAN INFRA LTD., NAGESHWAR INV . LTD ., AND SPLASH MEDIA & INFRA LTD. (PAGE 9 OF TH E C IT ( A) ORD E R), WAS UNUSUAL AND SUSPICIOUS . THEREAFTER T HE MUMBAI WING OF INVESTIGATION CARRI E D OUT SEAR CH & SEIZURE ACTION ON THE PREMISES OF THE ASSESS EE ON 06. 01. 20 16 , AS THEY WERE MAJOR BENEFICIARIES OF LONG TERM CAPITAL GAINS RECE I VED FROM DEALING IN SHAR E S OF THE COMPAN I ES BASED AT KOLK A TA . IN FACT THE TRANSACTIONS OF THE ASSESSEE AND HIS FA MIL Y MEMBERS WERE PART OF A HUGE SCAM OF BOGUS LONG TERM CAPITAL GAINS UNEARTHED BY KOLKATA WING AND MUMBAI WING OF INVESTIGATION THEIR FINDINGS WERE FORTIFIED BY THE INVESTIG A TIO N S C ARRI E D OUT B Y SEBI ALSO. 8.2. THE LD DR REFERRED TO THE DETAILED MODUS OPERANDI OF THIS BOGUS LONG TERM CAPITAL GAINS HAS BEEN DI S CUSSED BY THE AO IN PARA 6 TO 6.5 OF THE ASSESSMENT ORDER ON PAGE 5 TO 8 OF THE ASSESSMENT ORDER, WHER E THE FINDINGS OF KOLKATA WING OF INVESTIGATION AND SEBI INVESTIGATION S HAVE ALSO BEEN BRIEFLY MENTIONED. I T IS R ELEVANT TO MENTION OVER HERE THAT THE CIT(A) IN FIRST 96 PAG E S OF HIS ORDER DATED 22.02.2019 HAS DISCUSSED VARIOUS EVIDENC ES FOUND DURING THE COURSE OF SEARCH, WHICH PROVES BEYOND DOUBT THAT THESE LONG TERM CAPITAL GAINS RECEIVED BY THE ASSESSEE AND HIS FAMILY MEMBERS WAS ACTUALLY PRE CONCEIVED AND PRE ARRANGED AND WAS THEREFORE BOGUS IN NATURE. THE LD DR REFERRED TO THE FINDINGS OF THE LD CIT(A) TO THE EF FECT THAT HUGE CASH DEPOSITS AMOUNTING TO RS. 5.37 CRORES DURIN G F.Y. 2012-13 AND RS. 8.36 CRORES DURING F.Y . 2011 - 12 WERE MADE IN THE BANK ACCOUNTS OF M/S. ASHOK COMMERCIAL ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 35 ENTERPRISES (PAN- AAAFA9227F) MAINTAINED WITH STATE BANK OF INDIA, BANK ACCOUNT NO. 530506952250. FROM THIS ACCOUNT MONEY WAS CHANNELIZED IN THE ACCOUNT OF M / S JAI BHA GWATI IMPEX PVT. LTD. WHICH PURCHASE THE SHARE OF BOGU S SCRIP OF GLOBAL INFRA FROM TH E PRESENT ASSESSEE. THUS THE EXIT PROVIDERS OR THE PARTIES WHO PURCHASE THE SHARE FROM THE ASSESSEE GROUP HAD NO FUNDS TO BUY SUCH SHARES AND THEREFORE FUND INFUSION WAS ARRANGED. T HESE DETAILS HAVE BEEN DISCUSSED IN DETAIL BY THE CIT(A) AT PAGE NO. 93 TO 95 OF THE APPELLATE ORDER DA TED 22.02.2019, WHICH IS THE SUBJ EC T MATTER OF THIS APPEAL AND H E HAS DISCUSSED IN DETAILS THE MONEY TRAIL ALSO. PAGE 12 OF THE CIT(A) ORDER DISCUSSES STATEMENT OF SHRI BHARAT GADHIYA BROTHER OF THE ASSESSEE, WHICH WAS ONE OF THE BENEFICIARIES OF BOGUS LONG TERM CAPITAL GAINS AND HE HAS VERY CLEARLY ACCE PTED THAT HE WAS NOT AWARE OF HIS DEMAT ACCOUNT ETC AND DID NOT HAVE ANY KNOWLEDGE OF SHARE MARKET AND MENTIONED THAT ENTIRE THING WAS BEING DONE BY HIS BROTHER SHRI VINOD GADHIYA. SIMILAR STATEMENT WAS GIVEN BY RITA GADHIYA AND VIPIN GADHIYA WHOSE STATEMENTS ARE RECORDED ON PAGE 15, 16 AND 17 OF THE APPELLATE ORDER. IN THESE STATEMENTS THEY HAVE COMPLETELY EXPRESSED I GNORANCE ABOUT THE SHARE ACTIVITIES AND DEMAT ACCOU NTS ETC. SIMILARLY STATEMENT HAVE BEEN GIVEN BY SANGEETA GADHIYA (PAGE 23 OF CIT(A)'S ORDER), ARUN GADHIYA (PAGE 25 AND 26 OF CFJ'(A)'S ORDER), PARTH GADHIYA (PAGE 37 AND 38 OF CIT(A)'S ORDER). SHRI VINOD GADHIYA'S STATEME NT IS REPRODUCED ON 38 TO 49 OF CIT(A)'S ORDER), WHEREIN IN RESPONSE TO QUESTION NO. 29 HE MENTIONED THAT HE DI D NOT ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 36 KNOW THE EXACT DETAILS OF PREFERENTIAL ALLOTMENT OF SHARES TO HIM AND HIS FAMILY MEMBERS. IN QUESTION NO . 30 HE MENTIONED THAT HE DID THESE TRANSACTIONS ON ADVICE OF ONE SHRI V I NAY JAIN BUT IN RESPONSE TO QUESTION NO. 31 HE EXPRESSED HIS INABILITY IN TELLING HIS MOBILE NO. OR ADDRESS OR DETAILS OF HIS OFFICE OR BUSINESS ACTIVITIES. THE ASSESSEE ALSO COULD NOT TELL AS TO WHO INTRODUCED VINAY JAIN TO HIM. THEN IN QUES T ION NO. 40 HE WAS ASKED WHETHER ANY DUE DILIGENCE WAS DONE OR NOT AND HE REPLIED IN NEGATIVE. IN QUESTION 45 HE WAS ASKED WHETHER HE KNOW ANYTHING ABOUT THE COMPANY COMFORT FINCAP LTD ., HE REPLIED THAT HE DID NOT KNOW ANYTHING ABOUT THE BUSINESS ACTIVITIES OF THIS COMPANY AND HE FURTHER SAID THAT HE MADE INVESTMENT ON THE ADVICE OF ONE SHRI BHARAT SHIROYA BUT WHEN HE WAS ASKED FURTHER, HE COULD NOT GIVE ANY SATISFA C TORY R E PL Y ABOUT SHRI BHAR A T SHIROYA. SIMILARLY HE ALSO COULD NOT TELL EVEN SIM PLE DE TAILS AB O UT THE COMPANIES PSIT INFRASTRUCTURE AND INDUSTRIES LTD . AND SUNRISE A SIAN LTD. THE CIT(A) HAS SUMMED UP HIS FIN DINGS ON PAGE 49 AND 50 OF THE APPELLATE OR D E R AND HELD THAT THESE TRANSACTIONS WERE ACCOMMODAT ION ENTRIES. 8.3. THE LD DR SUBMITS THAT THE CIT(A) HAS FURTHER DISCUSSED STATEMENT OF ONE SHRI MUK E SH P. CHOUHAN ON PAGE NO. 50 TO 60 OF THE APPELLATE ORDER IN R E SPECT OF BLC T RADING AND AGENCIES PVT. LTD. ONE OF THE EXIT PROVIDERS TO GADHIYA GROUP. SHRI MUKESH CHOUHAN HAD CLEARLY MEN TI ON E D THAT HE WAS WORKING ONLY AS A TEMPO DRIV E R AND HI S INCOME WAS ONLY RS. 2 LAKH P.A AND THAT HE WAS ONLY ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 37 EDUCAT ED TILL 5 TH STANDARD AND THAT ENTIRE WORK OF BLC TRADING WAS LOOK ED AF T ER BY ONE PRADEEP CHOUDHARY AND RANU BHEEM SARIYA. THU S HE WAS ONLY A DIRECTOR FOR THE NAME SAKE AND ENTIRE COMP ANY WAS BEING CONTROLLED BY THE EN T RY PROVIDERS. ON PAGE 61, THE CIT(A) HAS DISCUSSED STATEMENT OF SHRI SAJJAN KEDIA, CHAIRMAN OF PSIT INFRASTRUCTURE AND SERVICES LTD . IN THE SAID STATEMENT SHRI SA J JAN KEDIA DEARLY MENTIONED THA T A C TIVITIES OF THIS COMPANIES ALONG WITH ACTIVITIES OF GLOBAL INFRA AND FINANCE LTD. WERE DEARLY MANAGED BY ONE SHRI JAGDISH PUROHIT. IN RESPONSE TO Q UESTION NO. 15 HE IS SAYING THAT SHRI JAGDISH PUROHIT USED TO CONVE RT TH E BLACK MONEY INTO LONG TERM CAPITAL GAINS FOR VARIOUS PERSONS. SIMILARLY STATEMENTS HAVE BEEN GIVEN BY SHRI ANUJ SUSHIL KUMAR AGARWAL (PAGE 64 OF THE APPELLA T E OR DE R ) WHEREIN HE HAS MENTIONED THAT TH ESE TRANSACTIONS WERE BOGUS IN NATURE . 8.4. THE LD DR FURTHER INFORMED THE BENCH THAT DURI NG THE COURSE OF INVESTIGATION STATEMENT OF ONE SHRI RAJ KU MAR KEDIA, NEW DELHI HAS ALSO BEEN RECORDED ON 13.06.2014 . SHRI RAJKUMAR KEDIA IS A DELHI BASED ENTRY PROVIDER. IN HIS STATEMENT IN RESPONSE TO QUESTION NO. 11 HE HAS VERY CLEARLY MENTIONED THAT THESE LONG TERM CAPITAL GAINS RECEIV ED BY THE ASSESSEE AND OTHERS WERE BOGUS IN NATURE. SI MILAR STATEMENT HAS BEEN GIVEN BY SHRI ANIL KUMAR A KOLKAT A BASED ENTRY OPERATOR DURING THE COURSE OF SURVEY U/S 133A, WHICH IS MENTIONED ON PAGE 82 TO 86 OF THE CIT(A) ORDE R AND CONFIRMED THAT THEY WERE SIMPLY WORKING FOR COMMISSION TO PROVIDE ACCOMMODATION ENTRIES. SHRI SOMAN CHOUDHARY IN ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 38 RESPECT OF GATEWAY FINANCIAL PVT. LTD. KOLKATA HAS CLEARLY MENTIONED THAT VARIOUS COMPANIES FROM WHICH ASSESSE E RECEIVED HUGE LONG TERM CAPITAL GAINS WERE ONLY JAMAKHARCHI COMPANIES, NAMELY PAPER COMPANIES WITHO UT ACTUALLY DOING ANY BUSINESS. IN RESPONSE TO QUESTION NO. 15 (PAGE NO. 90 OF THE CIT(A) ORDER) HE MENTIONED THAT C ASH WAS RECEIVED FROM THE OPERATORS/MANAGERS AND THE CASH WAS DEPOSITED IN DIFFERENT BANK ACCOUNTS AND THEN FUNDS WERE GENERATED THROUGH DIFFERENT ACCOUNTS AND ULTIMATELY LEADING TO PURCHASE/SALE OF SHARES. THE CIT(A) HAS ALSO EXA MINED THE MOVEMENT IN THE PRICE OF VARIOUS SCRIPTS WHICH ARE PART OF THE ANNEXURE OF CIT(A)'S ORDER WHICH CLEARLY SHO WS THAT PRICES WERE MOVED MANY FOLD IN A SHORT SPAN OF ABOU T ONE YEAR AND THEN THESE SHARES WERE SOLD BY GADHIYA FAM ILY TO EXIT PROVIDERS TO OBTAIN BOGUS LONG TERM CAPITAL GA IN. THE CIT'(A) HAS ALSO RELIED UPON VARIOUS DECISIONS OF H ON'BLE SUPREME COURT AND HIGH COURTS NAMELY HONBLE SUPREME COURT DECISION IN THE CASE OF CIT VS. DURGA PRASAD MORE. 82 ITR SUMATI DAYAL VS. CIT, 214 ITR 801 (SC). C IT VS. P. MOHANKALA, (2007) 291 ITR 278 (SC), AS ALSO ATTAR SINGH GUNMUKH SINGH VS. ITO 191 ITR 667 ON WHICH ARE ALSO RELIED UPON WITH PRAYERS TO CONFIRM THE ORDER OF THE CIT(A) BY DISMISSING THE APPEAL OF THE ASSESSEE. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT IN THIS CASE THE ASSESSEE HAS PURCHASED SHARES OF M/S. GLOBAL INFRA TECH AND FINA NCE PVT. LTD. IN THE PREFERENTIAL ALLOTMENT FOR A CONSIDERAT ION OF RS.35,35,885/- DURING THE FINANCIAL YEAR 2013-14. THE SAID ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 39 SHARES WERE ALLOTTED TO THE ASSESSEE TWO TIMES I.E. FIRST ON 19.01.2012 AND THEREAFTER ON 12.06.2012. BOTH THE TIMES THE ASSESSEE WAS ALLOTTED SHARES AT RS.15 COMPRISING FA CE VALUE OF RS.10 AND PREMIUM OF RS.5. THESE SHARES WERE LISTE D ON THE RECOGNIZED STOCK EXCHANGE AND THEREAFTER THE PRICES OF THE SHARES WENT UP SPIRALLY MANIFOLD. THESE SHARES WER E THEREAFTER SPLIT AND SUB DIVIDED IN THE RATIO OF 1:10 ON 13.12 .2012 MEANING THEREBY THAT PER ONE SHARE OF RS.10 EACH TH E ASSESSEE WAS ALLOTTED 10 SHARES OF RS.1 EACH. THIS WAS FOLL OWED BY ISSUE OF BONUS SHARES IN THE RATIO OF 10:1 ON 14.11.2014. WE NOTE THAT THE ASSESSEE HAS INVESTED IN THESE SHARES BY M AKING A PAYMENT THROUGH ACCOUNT PAYEE CHEQUES FROM THE REGU LAR BANK ACCOUNT OF THE ASSESSEE AND WERE HELD IN D-MAT ACCO UNT AND AFTER BEING HELD FOR MORE THAN 12 MONTHS THESE SHAR ES WERE SOLD THROUGH THE RECOGNIZED STOCK EXCHANGE THROUGH THE REGISTERED BROKERS ON DIFFERENT DATES STARTING FROM 28.05.2013 TILL 13.07.2013 AT A TOTAL SALE CONSIDERATION OF RS.16,82,26,728/- THEREBY MAKING A LONG TERM CAPITA L GAIN OF RS.16,46,90,843/-. NOW THE ISSUE BEFORE US IS WHET HER THE CLAIM OF THE ASSESSEE UNDER SECTION 10(38) OF THE A CT IS CORRECT OR NOT. THIS IS UNDISPUTED FACT THAT ASSESSEE IS A REGULAR INVESTOR INTO STOCK AND SHARE AS IS APPARENT FROM T HE FACTS ON RECORD AS THE ASSESSEE IS HOLDING MORE THAN 65 SCRI PS DURING THE YEAR. WE ALSO NOTE THAT THE COMPANY M/S. GLOBA L INFRA TECH AND FINANCE PVT. LTD. IN WHICH THE ASSESSEE IN VESTED MONEY AND EARNED LONG TERM CAPITAL GAIN OF RS.16,46 ,90,843/- IS A LISTED COMPANY ON THE STOCK EXCHANGE AND SUBJE CTED TO VARIOUS RULES AND REGULATIONS AND COMPLIANCES WHICH HAS TO BE COMPLIED WITH BEFORE MAKING ANY ALLOTMENT TO THE AP PLICANT ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 40 UNDER PREFERENTIAL ALLOTMENT PROCESS. WE ALSO NOTE THAT SHRI VINOD L. GADHIYA THE ASSESSEE THROUGHOUT THE SEARCH PROCEEDINGS AND ASSESSMENT PROCEEDINGS MAINTAINED T HAT HE WAS NOT PART OF ANY ORGANIZED ACTIVITY OR BEING BEN EFICIAL OF ACCOMMODATION ENTRIES TO EARN THE LONG TERM CAPITAL GAIN FROM THE SALE OF SHARES HELD IN M/S. GLOBAL INFRA TECH A ND FINANCE PVT. LTD. WE HAVE ALSO EXAMINED THE VARIOUS DOCUME NTS FILED BY THE ASSESSEE IN THE PAPER BOOK REGARDING DATE OF PURCHASE, ALLOTMENT OF EQUITY SHARES, MODE OF PAYMENT OF SHAR ES THROUGH ACCOUNT PAYEE CHEQUE, PERIOD OF HOLDING AND SALES O F THESE SHARES THROUGH ONLINE SCREEN BASED TRADING ON BOLT PLATFORM OF STOCK EXCHANGE THROUGH REGISTERED BROKERS M/S. INDI A ADVANTAGE SECURITIES LTD., M/S. ANAND RATHI SHARES AND STOCK BROKERS LTD. AND ALSO THE PROOF OF EXPENSES INCURRE D BY THE ASSESSEE BY WAY OF BROKERAGE, SERVICE TAX, STT, STA MP DUTY, EXCHANGE AND SEBI TURNOVER CHARGES ETC. THE ASSESS EE HAS FILED ALL THESE PROOFS BEFORE THE AO AS WELL AS THE LD. CIT(A) AS HAS BEEN STATED HEREINABOVE AND ARE BEING REPRODUCE D FOR THE SAKE OF CONVENIENCE. I. EVIDENCE OF PURCHASE OF SHARES APPLICATION OF SHA RES, ALLOTMENT OF SHARES, SHARE CERTIFICATES II. EVIDENCE OF PAYMENT FOR PURCHASE OF SHARES MADE BY ACCOUNT PAYEE CHEQUES, COPY OF BANK STATEMENTS III. COPY OF DEMAT STATEMENT REFLECTING PURCHASE IV. COPY OF DEMAT STATEMENT SHOWING SALE OF SHARES V. COPIES OF CONTRACT NOTE OF SALES OF SHARES VI. COPY OF BANK STATEMENT REFLECTING SALES RECEIPT VII. COPY OF BROKERS LEDGER. THE AO HAS REJECTED THE CLAIM OF THE ASSESSEE BY DISBELIEVING ALL THE ABOVE DOCUMENTS WHICH ARE A TH IRD PARTY DOCUMENTS AND TREATED THE SALE OF SHARES AS UNEXPLA INED CASH CREDIT UNDER SECTION 68 OF THE ACT ON THE GROUND TH AT ASSESSEE ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 41 HAS EARNED THIS LONG TERM CAPITAL GAIN BY TRADING I N PENNY STOCK COMPANY AND RELIED HEAVILY ON THE INVESTIGATI ON REPORT OF DIRECTORATE OF INVESTIGATION WING, KOLKATA, UPWARD MOVEMENT OF SHARE PRICES, STATEMENTS RECORDED BY THE DIRECTO RATE OF INVESTIGATION WING, KOLKATA OF VARIOUS PARTIES SUCH AS SHRI SAJAN DAMODAR PRASAD KEDIA, SHRI JAGDISH PUROHIT, S HRI MANOJ KUMAR AGGARWAL, SHRI SANJAY DEY, SHRI RAJ KUMAR KED IA AND SHRI SOUMAN CHOUDHARY ETC. AND THE FACT THAT THESE PARTIES WERE RELATED TO RED FORD GLOBAL LTD. WHO WERE OF EX IT PROVIDERS. THUS WE NOTE THAT AO HAS RELIED MAINLY ON THE STATE MENT OF THIRD PARTIES AND CIRCUMSTANTIAL EVIDENCES AND NO S UBSTANTIVE AND SPECIFIC MATERIAL WAS BROUGHT ON RECORD TO PROV E THESE ALLEGATIONS AND SIMILARLY LD. CIT(A) HAS REPRODUCED THE ENTIRE ORDER OF AO AND UPHELD THE SAME BY HOLDING THAT ASS ESSEE WAS BENEFICIARY OF ACCOMMODATION RACKET AND DOUBTED ONL Y THE MANIFOLD INCREASE IN THE SHARE PRICE BY REJECTING T HE FACTS ON RECORD AND VARIOUS EVIDENCING AND CORROBORATING THO SE FACTS. IT IS PERTINENT TO MENTION THAT NONE OF THE FAMILY MEM BERS OR THE ASSESSEE HAS EVER CONFESSED EITHER DURING THE SEARC H PROCEEDINGS OR DURING THE ASSESSMENT PROCEEDINGS TH E ALLEGATION AS LABELED BY THE AO OR BY THE SEARCH PA RTY. THERE ARE NO FINDINGS IN THE AOS ORDER ABOUT ANY INCRIMI NATING MATERIAL/DOCUMENT FOUND DURING THE SEARCH PERTAININ G TO THE EARNING OF LONG TERM CAPITAL GAIN BY THE ASSESSEE. THE ASSESSEE HAS FURNISHED VARIOUS DOCUMENTS AS STATED HEREINABO VE TO CORROBORATE THE CLAIM UNDER SECTION 10(38) OF THE A CT. WE NOTE THAT ASSESSEE HAS FURNISHED ALL THE DETAILS QUA BAN K ACCOUNTS, D MAT AND TRADING ACCOUNT, PROCESS OF PREFERENTIAL ALLOTMENT AND THE PERSON TO WHOM THE INVESTMENTS WERE MADE AN D ALSO ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 42 THE CONTRACT NOTE QUA THE SALE OF SHARES ON THE REC OGNIZED STOCK EXCHANGE THROUGH REGISTERED STOCK BROKERS. WE ALSO NOTE THAT IN THE INVESTIGATION CARRIED OUT BY THE DIRECTORATE OF INVESTIGATION WING, KOLKATA AND ALSO IN THE STATEME NTS RECORDED OF VARIOUS INDIVIDUALS AS STATED HEREINABO VE. WE FIND THAT NOWHERE THE ASSESSEES NAME FIGURED AND NO EVI DENCES WERE FOUND DURING THE COURSE OF SEARCH AND THE ENTI RE ALLEGATIONS WERE BASED UPON THE SURMISES AND CONJUN CTURES. THE SHARES WERE DULY ALLOTTED TO THE ASSESSEE AND W ERE RECORDED IN THE D-MAT ACCOUNT AND THEREAFTER WERE S OLD ON THE BOMBAY STOCK EXCHANGE THROUGH THE REGISTERED BROKER AND SCREEN BASED TRADING WHERE THE BUYER AND SELLER OF THE SHARES ARE NOT AWARE OF EACH OTHER AND THE FACT THAT THE C ONSIDERATION WAS PAID AND RECEIVED THROUGH BANKING CHANNELS. MO REOVER, THE AUTHORITIES BELOW HAVE FAILED TO ESTABLISH THE MONEY TRAIL INVOLVED IN THE TRANSACTION AND HAS ONLY GUESSED TH AT ASSESSEE MIGHT HAVE PAID HIS OWN MONEY TO ROUTE THE SAME INT O BOOKS OF ACCOUNTS WHICH WERE GENERATED THROUGH THE REAL ESTA TE DEVELOPMENT AND DIAMOND TRADING. THUS WE NOTE THAT THE FINDING OF THE AO IN DISCUSSING THE MODUS OPERANDI OF THE SCAM AND DISMISSING THE VARIOUS STATEMENTS OF THE EXIT P ROVIDERS IS ONLY GENERAL IN NATURE WHICH NOWHERE STATES THE NAM E OF THE ASSESSEE. THE AO HAS ALSO FAILED TO ESTABLISH A LI NK AMONG THESE REPORTS, STATEMENTS AND THE INVESTMENT MADE B Y THE ASSESSEE AND THEREFORE THE ADDITION MADE CAN NOT BE SUSTAINED. THE CASE OF THE ASSESSEE FINDS SUPPORT FROM THE DEC ISION OF THE HONBLE APEX COURT IN THE CASE OF ADAMINE CONSTRUCT ION PVT. LTD. 99 TAXMAN 45 WHEREIN WHILE DISMISSING THE APPE AL OF THE ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 43 REVENUE HAS REFERRED TO THE FOLLOWING OBSERVATION O F THE HONBLE DELHI HIGH COURT. WHAT IS EVIDENT IS THAT THE AO WENT BY ONLY THE RE PORT RECEIVED AND DID NOT MAKE THE NECESSARY FURTHER ENQUIRIES - SUCH AS INTO THE BANK ACCOUNTS OR OTHER PARTICULARS AVAILABLE WITH HIM BU T RATHER RECEIVED THE ENTIRE FINDINGS ON THE REPORT, WHICH CANNOT BE CONSIDERED AS PRIMARY MATERIAL. THE ASSESSEE HAD DISCHARGED THE O NUS INITIALLY CAST UPON IT BY PROVIDING THE BASIC DETAILS WHICH WERE N OT SUITABLY ENQUIRED INTO BY THE AO. 9.1. FURTHER, WE NOTE THAT THE AO HAS RELIED ON TH E STATEMENT OF HIS THIRD PARTIES WITHOUT AFFORDING ANY REASONAB LE OPPORTUNITY TO THE ASSESSEE TO CROSS EXAMINE THOSE PARTIES WHICH IS IN VIOLATION OF PRINCIPLE OF NATURAL JUSTI CE AS HAS BEEN HELD BY THE HONBLE APEX COURT IN THE CASE OF ANDAM AN TIMBER INDUSTRIES VS. CCE (CA) NO.4228 OF 2006 WHEREIN IT WAS HELD THAT NOT ALLOWING ASSESSEE TO CROSS EXAMINE THE WIT NESS BY ADJUDICATING AUTHORITY THOUGH THE STATEMENTS OF 6 W ITNESSES WERE MADE THE BASIS OF THE IMPUGNED ORDER IS NULLIT Y IN AS MUCH AS WHICH AMOUNTS TO VIOLATION OF PRINCIPLES OF NATURAL JUSTICE BECAUSE OF WHICH THE ASSESSEE WAS ADVERSELY AFFECTED. BESIDES THE ADDITION MERELY ON THE BASIS OF SUSPENS ION, CONJUNCTURE AND SURMISES CAN NOT BE SUSTAINED. THE CASE OF THE ASSESSEE FINDS SUPPORT FROM THE DECISION OF HON BLE APEX COURT IN THE CASE OF OMAR SALAY MOHAMED SAIT V/S CI T (1959) 37 ITR 151. THE HONBLE APEX COURT IN THE CASE OF UMACHARAN SHAW & BROS. VS CIT (1959 37 ITR 271) HAS HELD THAT SUSPICION HOW SO FAR STRONG COULD NOT TAKE THE CHARACTER OF L EGAL EVIDENCE. 9.2. WE FURTHER NOTE THAT THE AO HAS NOT MADE ANY A LLEGATION OF COMMISSION PAYMENT ON THE ALLEGED ACCOMMODATION ENTRIES AND NO ADDITION HAS BEEN MADE UNDER SECTION 69C OF THE ACT. ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 44 THE ASSESSEE HAS CATEGORICALLY STATED IN REPLY TO Q UESTION NO.44 AT PAGE NO.51 OF THE ASSESSMENT ORDER THAT NO COMMI SSION WAS PAID BY HIM WHICH IS NOT DISPUTED BY THE INVESTIGAT ION WING OR BY THE AO. FURTHER, WE ALSO NOTE THAT THERE IS NO RELATIONSHIP OF THE ASSESSEE/HIS FAMILY MEMBERS WITH THOSE PERSO NS FROM WHOM THE SHARES WERE PURCHASED OR SOLD AND NO SUCH MENTION OF THE NAME OF THE ASSESSEE OR HIS FAMILY MEMBER WA S THERE IN THE EVIDENCES GATHERED BY THE DEPARTMENT. THUS WE NOTE THAT NONE OF THE PARTIES ALLEGED BY THE REVENUE SUCH AS BROKER, OPERATOR, DIRECTORS, EXIT PROVIDERS ETC. WHOSE STAT EMENTS WERE RECORDED BY THE DIRECTORATE OF INVESTIGATION WING, KOLKATA STATED THE NAME OF THE APPELLANT/HIS FAMILY MEMBER. THE CASE OF THE ASSESSEE IS SUPPORTED BY A SERIES OF DECISIO NS AS HAS BEEN RELIED UPON BY THE LD. COUNSEL OF THE ASSESSEE DURING THE APPELLATE PROCEEDINGS BEFORE US AS UNDER: (A) IN THE CASE OF KUNAL DEDHIA VS. DCIT ITA NO.3893/M/2019 A.Y. 2014-15 & ORS. ORDER DATED 31.0 7.2020 THE BENCH OBSERVED AS UNDER: 22. THE PROVISIONS OF SECTION 68 OF THE INCOME TAX ACT, 1961 DEALS WITH A CASE, WHERE ANY SUM FOUND CREDITED IN THE BOOKS OF ACCOUN TS OF AN ASSESSEE IN ANY FINANCIAL YEAR AND ASSESSEE OFFERS NO EXPLANATION ABOUT NATURE AND SOURCE OR EXPLANATION OFFERED BY THE ASSESSEE IS NOT SATISFAC TORY IN THE OPINION OF THE AC, THEN SUM CREDITED MAY BE CHARGED TO TAX FOR THAT ASSESSMENT YEAR. IN CASE, ANY SUM FOUND CREDITED IN ANY FINAN CIAL YEAR, THE ASSESSEE IS REQUIRED TO PROVE, THE IDENTITY, GENUINENESS OF TRANSACTION AND CREDIT WORTHINESS OF THE CREDITOR. IN THIS CASE, ALTHOUGH THE AO HAS BROUGHT SUM RECEIVED TOWARDS SALE OF SHARES AS UNEXPLAINED CREDIT, BUT THE SAME-NEEDS TO BE EXAMINED WITH REFERENCE TO FIRST TWO ASPECTS OF SECTION 68 OF THE ACT, BEIN G THE IDENTITY AND GENUINENESS OF THE TRANSACTION AND THE OTHER ASPECT BEING CREDIT WORTHINESS IS STRICTLY NOT NECESSARY, BECAUSE THE SUM RECEIVED TOWARDS SAL E OF SHARES IS NEITHER A LOAN NOR A CREDIT. THEREFORE, THE TRANSACTION IS REQUIRE D TO BE TESTED UNDER FIRST TWO LIMBS, I.E. THE IDENTITY AND THE GENUINENESS OF THE TRANSACTION. TO PROVE IDENTITY OF SUM RECEIVED TOWARDS SALE OF SHARES , THE ASSESSEE HAS FILED COMPLETE DETAILS OF AMOUNT RECEIVED FROM THE BRO KER WHO FACILITATE TRANSFER OF ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 45 SHARES INCLUDING, CONTRACT NOTE ISSUED BY THE BROKE R FOR SALE OF SHARES IN BSE, LEDGER POLIO SIGNED BY THE BROKER, CONFIRMATION FRO M THE BROKER. IN FACT, THERE IS NO DISPUTE WITH REGARD TO IDENTITY OF THE BROKER, B ECAUSE THE BROKER WHO SOLD SHARES FOR THE ASSESSEE WAS A REGISTERED BROKER WIT H BSE/NSE, IN SO FAR AS GENUINENESS OF TRANSACTION, TRANSFER OF SHARES IS M ADE THROUGH DEMAT FORMAT IN BSE PLATFORM. THERE IS NO LINK OR NEXUS BETWEEN THE BUYER OF SHARES AND THE ASSESSEE. ALTHOUGH, THE AO, LINKED SALE OF SHARES T O SO CALLED EXIT PROVIDERS FROM WHOM THE ASSESSEE HAD INITIALLY PURCHASED SH ARES, BUT SAID TRANSACTION WAS DONE ALMOST TWO YEAR LATER. THE ASSESSES HAS PAID STT ON TRANSFER OF SHARES. THE SHARES HAVE BEEN TRANSFERRED TO THE BUY ER AFTER PAYMENT OF APPLICABLE STAMP- DUTY AND THE SHARE TRANSFER AGENT ENDORSED THE SALE. THE SALE PROCEEDS HAVE BEEN PAID THOROUGH BANK. THE SALE H AS BEEN MADE ON THE PREVAILING QUOTED RATE IN STOCK EXCHANGE ON THE DAT E OF SALE. AS REGARDS ALLEGATION OF THE AO REGARDING JACKING OF SHARES PRICE THROUGH GROUP OF PERSONS INVOLVED IN THE ALLEGED SCAM, WE FIND THAT ALTHOUGH S EBI HAS SUSPENDED TRADING PARTICULAR SCRIPT IN BSE/NSE PENDING ENQUIRY, BUT A FTER ENQUIRY SUSPENSION WAS REVOKED AND ONLY AFTER THE SCRIPT, WAS AGAIN STA RTS TRADING IN EXCHANGES, THE ASSESSEE HAS PURCHASED SHARES. FROM THE ABOVE, IT I S VERY CLEAR THAT THE OBSERVATIONS OF THE AO IN HIS ASSESSMENT ORDER ON T HE BASIS OF REPORT OF INVESTIGATION WING, KOLKATA IS A GENERAL OBSER VATION OF MODUS OPERANDI OF CERTAIN BROKERS MAY BE INVOLVED IN ALLEGED SCAM OF LTCG, BUT IT CANNOT BE A CONCLUSIVE EVIDENCE TO DRAW AN ADVERSE INFERENCE AG AINST THE ASSESSEE OF HAVING BENEFITED FROM SO CALLED ALLEGED SCARN. NO DOUBT, A N ALLEGED SCAM MAY HAVE TAKEN PLACE. BUT, IT HAS TO BE SEEN WHETHER THE ASSESSEE IS PART OF AN ALLEGED SCAM AND HE HAD ANY DIRECT OR INDIRECT ROLE IN ALLEGED SCAM. UNLESS, THE EVIDENCES IN THE POSSESSION OF THE AO DIRECTLY OR INDIRECTLY LINKED TO THE ASSESSEE, IT IS DIFFICULT TO IMPLICATE THE ASSESSEE IN THE ALLEGED SCAM. THIS IS BECAUSE, SUSPICION HOWEVER STRONG, CANNOT TAKE PLACE OF EVIDENCE AS HELD BY TH E HON'BLE SUPREME COURT IN THE CASE OF UMACHARAN SHAW & BROS VS. CIT(1959) 37 ITR 271(SC). IN OUR CONSIDERED VIEW, ON THE BASIS SUSPICION, MODUS OPERAND!, PREPONDERANCE OF HUMAN PROBABILITIES, THE CLAIM OF ASSESSEE CANNOT BE DI SCARDED, UNLESS SPECIFIC EVIDENCES ARE BROUGHT ON RECORD TO CONTROVERT VOLUM INOUS EVIDENCES FILED BY THE ASSESSEE. THIS VIEW IS FORTIFIED BY THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF OMAN SALAY MOHAMED SAIT VS. CIT (1959) 37 I TR 151(SC> WHERE IT WAS HELD THAT NO ADDITION CAN BE MADE ON THE BASIS OF SUSPIC ION AND CONJECTURES. IN THE CASE OF CIT VS. DAULAT RAM RAWATMUIL (1973) 87 ITR 349 (SC) IT WAS HELD THAT THE ONUS TO PROVE THAT APPARENT IS NOT REAL IS ON THE P ERSON WHO CLAIMS IT TO BE SO. (B) IN THE CASE OF VIJAYRATTAN BALKRISHAN MITTAL VS. DCIT ITA NO.3429/M/2019 & ORS. ORDER DATED 01.10.2019, THE C O- ORDINATE BENCH HAS HELD UNDER SIMILAR FACTS BY FOLL OWING VARIOUS DECISIONS OF THE APEX COURT AND HONBLE BOM BAY HIGH COURT THAT ADDITION MADE WHILE REJECTING THE CLAIM OF THE ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 46 ASSESSEE UNDER SECTION 10(38) OF THE ACT BE DELETED VIDE PARA NO.30 TO 37 OF THE SAID DECISION. (C) IN THE CASE OF MUKESH B. SHARMA VS. ITO ITA NO.6249/M/2018 A.Y. 2014-15 ORDER DATED 29.05.2019 THE SCIP INVOLVED WAS OF THE SAME COMPANY AND THE ADDIT ION WAS DELETED BY THE CO-ORDINATE BENCH BY OBSERVING AND H OLDING AS UNDER: 6. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE PRIMAR Y FACTS STATED HEREINABOVE REMAIN UNDISPUTED AND HENCE THE SAME ARE NOT REITER ATED FOR THE SAKE OF BREVITY. THE ASSESSEE SUBMITTED THE FOLLOWING DETAILS WITH R EGARD TO PURCHASE OF SHARES :- A) COPY OF RELEVANT EXTRACT OF BANK STATEMENT REFLECTI NG THE PAYMENT OF RS 30 LACS MADE BY THE ASSESSEE BY ACCOUNT PAYEE CHEQUE TO THE COMPANY DIRECTLY AND SOURCE THEREOF ALONG WITH ALLOTMENT LETTER ISSUED BY THE S AID COMPANY (I.E GIFL) AND COPY OF SHARE CERTIFICATE ISSUED BY GIFL TO THE ASSESSEE ON 12.6.2012. THESE DOCUMENTS ARE ENCLOSED IN PAGES 71 TO 73 OF PAPER BOOK. B) DEMAT ACCOUNT HELD WITH NKGSB CO-OPERATIVE BANK LIM ITED REFLECTING CREDIT OF SHARES PURCHASED (ENCLOSED IN PAGE 154 OF PAPER BOO K). C) COPY OF APPROVAL LETTER FROM GIFL. D) COPY OF ALLOTMENT LETTER FROM GIFL FOR SHARES ALLOT TED TO THE ASSESSEE. E) COPY OF SHARE CERTIFICATE ISSUED BY GIFL. F) VARIOUS EVENTS REPORTED BY GIFL TO BSE. 6.1. THE ASSESSEE SUBMITTED THE FOLLOWING DETAILS W ITH REGARD TO SALE OF SHARES:- A) COPY OF DEMAT STATEMENT REFLECTING THE SALE OF SHAR ES. B) COPIES OF CONTRACT NOTES ISSUED BY BOTH THE BROKERS FOR SALE OF SHARES. C) COPY OF HOLDING STATEMENT FOR FINANCIAL YEARS 2012- 13 AND 2013-14. D) PRICE CHART OF GIFL FROM THE DATE OF PURCHASE OF SH ARES TILL THE RECENT PERIOD. E) COPY OF RELEVANT EXTRACT OF BANK STATEMENT OF THE A SSESSEE REFLECTING THE SALE PROCEEDS RECEIVED FROM THE BROKER AND CREDITED TO T HE BANK ACCOUNT. 6.2 WE FIND THAT THE ASSESSEE PLEADED THAT IN AN ON LINE PLATFORM, THERE WOULD BE NO NEXUS BETWEEN THE PURCHASERS AND THE SELLER A ND THE DELIVERY OF SHARES AND PAYMENTS WOULD BE MADE THROUGH THEIR RESPECTIVE STO CK BROKERS. HENCE THE LD AO OUGHT TO HAVE SUMMONED THE ASSESSEES BROKERS TO EX AMINE THE AUTHENTICITY OF THE SALE OF SHARES OF GIFL AND THE AMOUNT RECEIVED ON S ALE OF SHARES. WE FIND THAT THE LD ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 47 AR ALSO PLACED EVIDENCES ON RECORD TO PROVE THAT TH E SAID COMPANY GIFL IS STILL LISTED IN THE STOCK EXCHANGE AND SHARES OF THIS COMPANY AR E BEING TRADED AND SEBI HAD NOT PASSED ANY ADVERSE ORDER AGAINST THE SAID COMPANY. WE FIND THAT THE DETAILS OF REVENUE AND PROFITS OF GIFL FOR VARIOUS YEARS ARE A S UNDER:- FINANCIAL YEAR ENDING REVENUE PROFIT 31.3.2012 191 LACS 7.97 LACS 31.3.2013 1515.58 LACS 105.13 LACS 31.3.2014 2487 LACS 161 LACS 31.3.2015 3836 LACS 76 ACS 6.3. WE FIND THAT THE LD AO HAD PLACED RELIANCE ON CERTAIN STATEMENTS RECORDED BY THE INVESTIGATION WING OF KOLKATA INCOME TAX DEP ARTMENT DURING SOME SURVEY PROCEEDINGS CONDUCTED IN THIRD PARTY CASES. WE FIND THAT IN NONE OF THOSE STATEMENTS, THE NAME OF THE ASSESSEE OR THE NAME OF THE BROKERS THROUGH WHOM ASSESSEE HAD TRANSACTED WERE MENTIONED. WE ALSO FIN D THAT THERE IS NO MENTION OF ANY CONNIVANCE ON THE PART OF THE ASSESSEE WITH THE SHARE BROKER AND STOCK EXCHANGE TO LAUNDER THE UNACCOUNTED MONIES OF THE ASSESSEE A ND BRING IT BACK IN THE FORM OF SALE PROCEEDS OF SHARES AND CLAIM EXEMPTION U/S 10( 38) OF THE ACT FOR THE LONG TERM CAPITAL GAINS DERIVED THEREON. NONE OF THE PARTIES ON WHOM SURVEY ACTIONS WERE CONDUCTED IN KOLKATA WERE RELATED TO ASSESSEE OR TH E BROKERS IN ANY MANNER WHATSOEVER. WE FIND THAT THE VARIOUS PURCHASE AND S ALE DETAILS TOGETHER WITH THE SUPPORTING EVIDENCES WERE NOT CONTROVERTED BY THE R EVENUE BEFORE US. EVEN THE CROSS EXAMINATION OF THE PARTIES MENTIONED IN THE S HOW CAUSE NOTICE ISSUED TO THE ASSESSEE BY THE LD AO WERE SOUGHT BY THE ASSESSEE A ND THE SAME WERE REFUSED BY THE LD AO . WE FIND THAT THE LD AO HAD ALSO PLACED RELI ANCE ON THE ORDER PASSED BY SEBI WHILE CONCLUDING THAT THE TRANSACTIONS CARRIED OUT BY THE ASSESSEE IN THE FORM OF SALE OF SHARES AS SHAM AND BOGUS. FROM THE PERUSAL OF TH E SEBI ORDER DATED 25.8.2016 IN THE CASE OF FIRST FINANCIAL SERVICES LTD, WE FIND T HAT FROM THE EXTRACTS THEREON, THAT IT WAS STATED THAT M/S GIFL WAS INVOLVED IN PROVIDING EXIT TO THE SELLERS OF EQUITY SHARES OF FIRST FINANCIAL SERVICES LTD AND NO WHERE STATED THAT THIS COMPANY WAS INVOLVED IN PROVIDING ACCOMMODATION ENTRIES IN THE FORM OF CAPITAL GAINS BY TRANSACTING ITS OWN SHARES THROUGH THE ALLEGED BOGU S OPERATORS. WE ALSO FIND THAT THE SEBI HAD PASSED ON ORDER DATED 8.1.2018 IN THE CASE OF GIFL, WHEREIN IT WAS FOUND THAT THE NAME OF THE ASSESSEE HEREIN OR THE BROKERS THROUGH WHOM THE ASSESSEE TRANSACTED WERE NOT EVEN INCLUDED IN THE SAID ORDER AS PARTIES AGAINST WHOM ANY ADVERSE INFERENCE / FINDINGS WERE FOUND IN RESPECT OF VIOLATION OF PROVISIONS OF SEBI. WE FIND THAT SEBI HAD ISSUED A SHOW CAUSE NOTICE VI DE REFERENCE SEBI/EAD- 12/SM/EE/693/25/2018 DATED 8.1.2018 WHICH ARE ENCLO SED IN PAGES 252 TO 266 OF THE PAPER BOOK. IN PAGES 257 AND 258 OF THE PAPER BOOK, THE LIST OF PARTIES TO WHOM SHOW CAUSE NOTICES WERE ISSUED BY SEBI IS LISTED OU T. IN THE ENTIRE LIST, NEITHER THE NAME OF THE ASSESSEE NOR HIS LBROKERS WERE INCLUDED . LATER THERE WAS ANOTHER SHOW ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 48 CAUSE NOTICE VIDE REFERENCE EFD/DRA3/OW/NB/6663/201 8 DATED 1.3.2018 WAS ISSUED BY ENFORCEMENT DEPARTMENT OF SEBI MENTIONING THE LIST OF PARTIES TO WHOM SHOW CAUSE NOTICES WERE ISSUED. EVEN IN THIS LIST, THE NAME OF THE ASSESSEE OR HIS BROKER WAS NOT INCLUDED BY SEBI. HENCE IT COULD BE SAFELY CONCLUDED THAT SEBI DID NOT ALLEGE ANY WRONG DOING ON THE PART OF THE ASSES SEE OR HIS BROKERS WITH REGARD TO CARRYING OUT TRANSACTIONS IN SALE OF SHARES OF GIFL IN OPEN MARKET IN ONLINE PLATFORM. IN THIS SUBSEQUENT SHOW CAUSE NOTICE DATED 1.3.2018 , THE SEBI ALSO TAKES RECORDS THE FACT OF ISSUANCE OF SHARES ON PREFERENTIAL ALLOTMEN T BASIS ON 12.6.2012 BY GIFL TO VARIOUS PARTIES (WHICH INCLUDES THE ASSESSEE ALSO T HOUGH NOT NAMED IN THE SEBI SHOW CAUSE NOTICE). IN THIS SHOW CAUSE NOTICE ALSO, THE SEBI ONLY ACCUSED NOTICE NO. 1 TO 7 LISTED IN THE SAID NOTICE WHICH ADMITTEDLY DOES NOT INCLUDE THE ASSESSEE OR HIS BROKERS, TO HAVE ENGAGED IN MANIPULATION OF PRICE O F THE SCRIP OF GIFL. THE SAID SHOW CAUSE NOTICE DATED 1.3.2018 ALSO STATED THAT NOTICE NOS. 13 TO 46 LISTED IN THE SAID NOTICE WHICH ADMITTEDLY DOES NOT INCLUDE THE ASSESS EE OR HIS BROKERS, TO HAVE SOLD THE SHARES AT INFLATED PRICE AND BOOKED SUBSTANTIAL PROFIT. THE SAID SHOW CAUSE NOTICE DATED 1.3.2018 ALSO STATED NOTICES NOS. 8 TO 12 (WH ICH ADMITTEDLY DOES NOT INCLUDE THE ASSESSEE OR HIS BROKERS) WERE PART OF THE MANIP ULATIVE SCHEME TO MAKE PREFERENTIAL ALLOTMENT AND MANIPULATE THE PRICE, TH ROUGH, ENTITIES CONNECTED TO COMPANY AND PROMOTER, TO BENEFIT PROMOTER, PROMOTER RELATED ENTITIES AND CONNECTED PREFERENTIAL ALLOTTEES. IT IS NOT THE CAS E OF THE REVENUE THAT THE ASSESSEE OR HIS BROKERS WERE EITHER THE PROMOTERS OF GIFL, OR P ROMOTER RELATED ENTITIES OF GIFL OR RELATED TO CONNECTED PREFERENTIAL ALLOTTEES THERE ON. HENCE IT COULD BE SAFELY CONCLUDED THAT THE SEBI HAD NOT FOUND ANY ADVERSE F INDINGS WITH REGARD TO THE ASSESSEE OR HIS REGISTERED SHARE BROKERS VIS A VIS GIFL. HENCE THERE IS ABSOLUTELY NO IOTA OF EVIDENCE LINKING THE ASSESSEE OR THE REGIST ERED BROKERS TO EVEN REMOTELY ALLEGE THAT THEY WERE INVOLVED IN ARTIFICIAL RIGGIN G OF PRICE OF SCRIPS WHICH WERE DEALT BY THE ASSESSEE HEREIN. 6.4 WE FIND THAT THE LD AO HAD STATED THAT GIFL IS A COMPANY OF NO VALUE. THE REVENUE STREAM AND THE PROFITABILITY CHART REPRODUC ED HEREINABOVE DOES NOT SUPPORT THE CASE OF THE LD AO. MOREOVER, THE STATUS REPORTE D BY THE LD AO ABOUT GIFL WAS IN ASST YEAR 2008-09 WHICH IS NEITHER THE YEAR OF P URCHASE OF SHARES BY THE ASSESSEE NOR THE YEAR OF SALE OF SHARES IN OPEN MARKET. HENC E THOSE FINDINGS ARE TOTALLY IRRELEVANT FOR ADJUDICATION OF THE ISSUE BEFORE US. 6.5. WE FIND THAT THE REVENUE HAD MERELY DISBELIEVE D THE ENTIRE DOCUMENTARY EVIDENCES ON RECORD AND ALLEGED THE SHARE SALE TRAN SACTIONS MADE IN THE OPEN MARKET AS BOGUS BASED ON THE STATEMENTS RECORDED DURING SU RVEY, WHICH DOES NOT HAVE ANY EVIDENTIARY VALUE. RELIANCE IN THIS REGARD IS PLACE D ON THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF S.KHADER KHAN (2008) 300 ITR 157 (MAD) ASSUMES SIGNIFICANCE, WHEREIN IT WAS HELD THAT :- AN ADMISSION IS AN EXTREMELY IMPORTANT PIECE OF EV IDENCE , BUT IT CANNOT BE SAID THAT IT IS CONCLUSIVE AND IT IS OPEN TO THE PERSON , WHO MADE IT, TO SHOW IT HAS ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 49 INCORRECTLY BEEN MADE AND THE PERSON, MAKING THE ST ATEMENT SHOULD BE GIVEN PROPER OPPORTUNITY TO SHOW THAT IT DOES NOT SHOW TH E CORRECT STATE OF FACTS. THE MATERIALS FOUND IN THE COURSE OF SURVEY COULD N OT BE THE BASIS FOR MAKING ANY ADDITION IN THE ASSESSMENT. THE WORD MAY USED IN SECTION 133A(3)(III) MAKES IT CLEAR THAT THE MATERIAL COLLECTED AND STATEMENT REC ORDED DURING THE SURVEY U/S 133A OF THE ACT ARE NOT CONCLUSIVE PIECE OF EVIDENCES BY ITSELF. THE AFORESAID DECISION WAS AFFIRMED BY THE HONOURABLE SUPREME COURT IN CIT , S ALEM VS S.KHADER KHAN IN CIVIL APPEAL NO. 13224 OF 2008 & 6747 OF 2012 DATED 20.9. 2012, WHEREIN THEIR LORDSHIPS OF SUPREME COURT HELD AS UNDER:- CIT VS S KHADER KHAN SON REPORTED IN (2012) 25 TAXM ANN.COM 413 (SC) / 210 TAXMAN 248 (SC) AND 254 CTR 228 (SC) HEARD COUNSEL ON BOTH THE SIDES. LEAVE GRANTED. THE CIVIL APPEAL FILED BY THE DEPARTMENT PERTAINS T O ASSESSMENT YEAR 2001- 02. IN VIEW OF THE CONCURRENT FINDINGS OF FACT, THIS CI VIL APPEAL IS DISMISSED. IN ANY CASE, WE FIND THAT THESE STATEMENTS WERE NEV ER SUBJECTED TO ANY CROSS EXAMINATION BY THE ASSESSEE DESPITE THE REQUEST MAD E BY THE ASSESSEE IN THIS REGARD, WHICH HAS BEEN SUMMARILY REJECTED BY THE LD AO. THIS FACT IS ALSO RECORDED BY THE LD AO IN HIS ASSESSMENT ORDER. HENCE IN THE SE CIRCUMSTANCES, WE HOLD THAT NO ADDITION COULD BE MADE MERELY BASED ON THE STATE MENTS RECORDED DURING SURVEY. 6.6. ONE MORE EXCRUCIATING FACTOR WHICH GOES IN FAV OUR OF THE ASSESSEE IS THAT THE ASSESSEE HAD SOLD ONLY 883000 SHARES OUT OF 200 0000 SHARES HELD BY HIM AND THE REMAINING SHARES WERE RETAINED BY THE ASSESSEE. HE NCE THE ALLEGATIONS LEVELED ON THE ASSESSEE THAT ASSESSEE HAD CONVERTED HIS UNACCO UNTED MONEY IN THE FORM OF LONG TERM CAPITAL GAINS CLAIMED AS EXEMPT DOES NOT HOLD WATER . EVEN THESE 883000 SHARES WERE SOLD AFTER HOLDING THE SAME FOR A SUBSTANTIAL MINIMUM PERIOD OF 26 MONTHS BY THE ASSESSEE FROM THE DATE OF ITS PURCHASE. MOREOVE R, WHEN THE PURCHASE OF SHARES MADE BY THE ASSESSEE HAS BEEN ACCEPTED AS GENUINE W HICH WAS DONE IN ASST YEAR 2013-14, THE SALE OF THE VERY SAME SHARES IN PART I N ASST YEAR 2014-15 IN OPEN MARKET AT PREVAILING MARKET PRICES AFTER SUFFERING STT SHO ULD NOT BE DOUBTED . NONE OF THE DOCUMENTS FILED BY THE ASSESSEE WITH REGARD TO PURC HASE AND SALE OF SHARES HAVE BEEN FOUND TO BE DEFICIENT IN ANY MANNER WHATSOEVER BY T HE REVENUE. FROM THE TURNOVER CHART STATED HEREINABOVE, IT COULD BE SEEN THAT THE REVENUE OF GIFL HAD INCREASED FROM RS 191 LACS AS ON 31.3.2012 TO RS 2487 LACS AS ON 31.3.2014. THIS GOES TO PROVE THAT THE PROJECTIONS GIVEN BY THE SAID COMPANY IN I TS INVITATION LETTER TO THE ASSESSEE REQUESTING FOR MAKING PREFERENTIAL APPLICATION OF S HARES HAD PROVED TO BE CORRECT AND CANNOT BE DOUBTED. 6.7. WE FIND THAT THE LD AO HAD FURNISHED CERTAIN L IST OF PARTIES WHO WERE ALLEGED PURCHASERS OF SHARES FROM THE ASSESSEE WHEN IT WAS SOLD IN THE OPEN MARKET BY THE ASSESSEE. THE ASSESSEE HAD PLEADED THAT SINC E THE SHARES WERE SOLD IN THE OPEN MARKET IN ONLINE PLATFORM, HE IS NOT AWARE OF THE N AME OF THE PARTIES AS TO WHO HAD BOUGHT THE SAME IN THE OPEN MARKET. THE LD AO SOUGH T TO ISSUE SUMMONS TO THOSE ALLEGED PURCHASERS OF SHARES U/S 131 OF THE ACT, WH ICH REMAIN UNCOMPLIED BY THOSE PARTIES. BASED ON THIS, THE LD AO HAD DRAWN AN ADVE RSE INFERENCE AGAINST THE ASSESSEE DISREGARDING THE ENTIRE DOCUMENTARY EVIDENCES ON RE CORD AND THE PREVAILING MARKET PRACTICES WITH REGARD TO PURCHASE AND SALE OF SHARE S IN THE OPEN MARKET IN ONLINE PLATFORM. IT IS NOT IN DISPUTE THAT THE ASSESSEE HA D RECEIVED THE SALE PROCEEDS OF ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 50 SHARES FROM THE REGISTERED BROKER THROUGH THE STOCK EXCHANGE ONLY AND NOT FROM THE ALLEGED PURCHASERS OF SHARES DIRECTLY. MOREOVER, TH E LD AO STATES THAT THE ASSESSEE HAD SOLD THE SHARES AT RS 211.76 PER SHARE WHEREAS THE AVERAGE SALE PRICE OF THE ASSESSEE WAS ONLY RS 89 PER SHARE. 6.8. WE FIND THAT THE LD DR MADE GENERAL SUBMISSION S WITH REGARD TO THE INVESTIGATIONS CARRIED OUT BY KOLKATA INCOME TAX DE PARTMENT AFTER IDENTIFYING 84 SCRIPS TO BE PENNY STOCKS AND THE MODUS OPERANDI AD OPTED BY THOSE SCRIPS WITH THE CONNIVANCE OF VARIOUS ENTRY OPERATORS, BROKERS AND STOCK EXCHANGE. WE FIND THAT THE LD DR WAS NOT SPECIFICALLY ABLE TO CONTROVERT THE D OCUMENTARY EVIDENCES FILED BY THE ASSESSEE FOR PURCHASE AND SALE OF SHARES AND VARIOU S OTHER DOCUMENTS REFERRED TO IN THE PAPER BOOK MORE PARTICULARLY THE SEBI SHOW CAUS E NOTICE AS DETAILED HEREINABOVE, EXCEPT STATING THAT SEBI SHOW CAUSE NOTICE WAS ISSU ED IN THE NAME OF GIFL, THE SCRIP IN WHICH ASSESSEE DEALT. THE LD DR ALSO SOUGHT PERMIS SION FROM THE BENCH TO GRANT TIME FOR FILING HIS WRITTEN SUBMISSIONS WITH REGARD TO THE ENTIRE APPEAL. NO SUCH WRITTEN SUBMISSION WAS FILED BY THE LD DR TILL THE DATE OF DICTATION OF THIS ORDER. THE LD DR DREW OUR ATTENTION TO THE STATEMENT RECORDED FRO M THE ASSESSEE BY THE LD AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS ON 19.1 2.2016, THE GIST OF WHICH IS MENTIONED IN PAGE 31 OF ASSESSMENT ORDER. WE HAVE G ONE THROUGH THE SAME AND WE FIND THAT THE ASSESSEE HAD STATED BEFORE THE LD AO THAT HE HAD MADE INVESTMENT IN SHARES OF GIFL WITHOUT LOOKING INTO THE FUNDAMENTAL S OF THE SAID COMPANY AND BASED ON INFORMATION GIVEN BY A FAMILY FRIEND. WE HAVE AL READY SEEN THE DOCUMENTARY EVIDENCES AVAILABLE ON RECORD WHEREIN THE ASSESSEE IN RESPONSE TO AN INVITATION LETTER ISSUED BY GIFL FOR MAKING INVESTMENT IN PREFERENTIA L ALLOTMENT BASIS, HAD ISSUED ACCOUNT PAYEE CHEQUES AND GOT THE SHARES ALLOTTED I N HIS NAME ON PREFERENTIAL ALLOTMENT BASIS. THESE FACTS HAVE ALSO BEEN NOTED B Y SEBI IN THE SECOND SHOW CAUSE NOTICE DATED 1.3.2018 WHICH HAS BEEN DISCUSSED HERE INABOVE. MERELY BECAUSE THE ASSESSEE HIMSELF IS ENGAGED IN INDEPENDENT MANUFACT URING BUSINESS , IT CANNOT BE SAID THAT ALL HIS INVESTMENT DECISIONS WOULD BE PRUDENT AND WOULD BE DONE ONLY AFTER ANALYZING THE ENTIRE FUNDAMENTALS AND FINANCIALS OF THE INVESTEE COMPANY. IT IS IN EVERYBODYS KNOWLEDGE, THAT AN INVESTOR WOULD TRY T O TAKE CALCULATED RISKS BY INVESTING HIS MONEY ON AN UNKNOWN SCRIP BASED ON CE RTAIN INFORMATION FROM FRIENDS, RELATIVES, OR IN SOME STOCK MARKET RELATED WEBSITES AND TAKE A CHANCE. SINCE THE SCRIP PURCHASED BY THE ASSESSEE WAS SHOWING CONSIDERABLE GROWTH FROM THE TIME OF PURCHASE, THE ASSESSEE BEING A GULLIBLE INVESTOR, C ONTINUED TO HOLD IT FOR A PERIOD OF 26 MONTHS AND LATER SOLD IT IN OPEN MARKET IN ONLINE P LATFORM AT PREVAILING MARKET PRICES. 6.9. WE FIND THAT THE CO-ORDINATE BENCH OF KOLKATA TRIBUNAL IN ITA NO.354/KOL/2018 IN SANJEEV GOEL (HUF) VS. ITO DATED 24.08.2018 ON SIMILAR SET OF FACTS AND CIRCUMSTANCES HAD HELD AS FOLLOWS:- 4. WE HAVE HEARD RIVAL CONTENTIONS. ON CAREFUL CONS IDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, PERUSAL OF THE PAPERS ON RECORD, ORDERS OF THE AUTHORITIES BELOW AS WELL AS CASE LAW CITED, WE HOL D AS FOLLOWS:- 5. IN IDENTICAL CASES, THE SUBMISSION OF THE ASSESSEE, FINDINGS OF THE ASSESSING OFFICER, FINDINGS OF THE LD. CIT(A) AND THE CONCLUS ION OF THE TRIBUNAL HAVE BEEN BROUGHT OUT AS UNDER:- 6. THE ADDITION WAS MADE BY THE ASSESSING OFFICER BY O BSERVING AS UNDER:- I. THE INITIAL ALLOTMENT OF SHARES TO BENEFICIARIES IS GENERALLY DONE THROUGH PREFERENTIAL ALLOTMENT. ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 51 II. THE MARKET PRICE OF SHARES OF THESE COMPANIES RISE TO VERY HIGH LEVEL WITHIN A SPAN OF ONE YEAR. III. THE TRADING VOLUME OF SHARES DURING THE PERIOD, IN WHICH MANIPULATIONS ARE DONE TO RAISE THE MARKET PRICE, I S EXTREMELY THIN. IV. MOST OF THE PURPORTED INVESTORS ARE RETURNED THEIR INITIAL INVESTMENT AMOUNT IN CASH. ONLY SMALL AMOUNT IS RETAINED BY TH E OPERATOR AS SECURITY. THUS, AN ENQUIRY WOULD REVEAL THAT MOST OF THE CAPI TAL RECEIPTS THROUGH PREFERENTIAL ALLOTMENT OR OTHER MEANS WOULD HAVE FO UND THEIR WAY OUT OF SYSTEM AS CASH. V. MOST OF THESE COMPANIES HAVE NO BUSINESS AT ALL. FE W OF THE COMPANIES WHICH HAVE SOME BUSINESS DO NOT HAVE THE CREDENTIAL S TO JUSTIFY THE SHARP RISE IN MARKET PRICE OF THEIR SHARES. VI. THE SHARP RISE IN MARKET PRICE OF THE SHARES OF THE SE ENTITIES IS NOT SUPPORTED BY FUNDAMENTALS OF THE COMPANY OR ANY OTH ER GENUINE FACTORS. VII. AN ANALYSIS IN RESPECT OF PERSONS INVOLVED IN TRANS ACTIONS APPARENTLY CARRIED OUT IN ORDER TO JACK UP THE SHARE PRICES HA S BEEN DONE IN RESPECT OF 84 COMPANIES. IT HAS BEEN NOTED THAT MANY COMMON PE RSONS/ENTITIES WERE INVOLVED IN TRADING IN MORE THAN 1 LTCG COMPAN IES DURING THE PERIOD WHEN THE SHARES WERE MADE TO RISE WHICH IMPLIES THA T THEY HAD CONTRIBUTED TO SUCH PRICE RISE. VIII. NAMES OF MOST OF THE LTCG COMPANIES ARE CHANGED DUR ING THE PERIOD OF THE SCAM. IX. MOST OF THE COMPANIES SPLIT THE FACE VALUE OF SHARE S [THIS IS PROBABLY DONE TO AVOID THE EYES OF MARKET ANALYSTS]. X. THE VOLUME OF TRADE JUMPS MANIFOLD IMMEDIATELY WHEN THE MARKET PRICES OF SHARES REACH AT OPTIMUM LEVEL SO AS TO RE SULT IN LTCG ASSURED TO THE BENEFICIARIES. THIS MAXIMUM IS REACHED AROUND T HE TIME WHEN THE INITIAL ALLOTTEES HAVE HELD THE SHARES FOR ONE YEAR OR LITTLE MORE AND THUS, THEIR GAIN ON SALE OF SUCH SHARES WOULD BE ELIGIBLE FOR EXEMPTION FROM INCOME TAX. XI. AN ANALYSIS OF SHARE BUYERS OF SOME OF LTCG COMPANI ES WAS DONE TO SEE IF THERE WERE COMMON PERSONS/ENTITIES INVOLVED IN BUYING THE BOGUS INFLATED SHARES. IT WAS NOTED THAT THERE WERE MANY COMMON BUYERS [WHICH WERE PAPER COMPANIES]. XII. THE PRICES OF THE SHARES FALL VERY SHARPLY AFTER TH E SHARES OF LTCG BENEFICIARIES HAVE BEEN OFF LOADED THROUGH THE PRE- ARRANGED TRANSACTIONS ON THE STOCK EXCHANGE FLOOR/PORTAL TO THE SHORT TER M LOSS SEEKERS OR DUMMY PAPER ENTITIES. XIII. THE SHARES OF THESE COMPANIES ARE NOT AVAILABLE FOR BUY/SELL TO ANY PERSON OUTSIDE THE SYNDICATE. THIS IS GENERALLY ENS URED BY WAY OF SYNCHRONIZED TRADING BY THE OPERATORS AMONGST THEMS ELVES AND/OR BY UTILIZING THE MECHANISM OF UPPER/LOWER CIRCUIT OF T HE EXCHANGE. 7. AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN APPEAL . 8. THE FIRST APPELLATE AUTHORITY UPHELD THE ORDER OF T HE ASSESSING OFFICER BY GIVING HIS FINDINGS AS FOLLOWS:- A) THE AO HAD PLACED ON RECORD THE ENTIRE GAMUT OF FIN DING AND THERE IS NO FURTHER REQUIREMENT FOR ELABORATION. ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 52 B) THERE IS DIRECT EVIDENCE TO CLEARLY INDICATE THAT T HE ENTIRE TRANSACTION UNDERTAKEN BY THE ASSESSEE WAS MERELY AN ACCOMMODAT ION TAKEN FOR THE PURPOSE OF BOGUS LONG TERM CAPITAL GAINS TO CLAIM E XEMPT INCOME. THE AUTHORITIES SUCH AS SEBI HAVE AFTER INVESTIGATING S UCH ABNORMAL PRICE INCREASE OF CERTAIN STOCKS, SUSPENDED CERTAIN SCRIP S. C) THE SUBMISSIONS OF THE ASSESSEE POINTED OUT TOWARDS ELABORATE DOCUMENTATION SUCH AS : I) APPLICATION OF SHARES. II) ALLOTMENT OF SHARES. III) SHARE CERTIFICATES IV) PAYMENT BY CHEQUES V) FILINGS BEFORE REGISTRAR OF COMPANIES. VI) PROOF OF AMALAGAMATION OF COMPANIES. VII) COPIES OF BANK STATEMENT, VIII) BANK CONTRACT NOTES. IX) DELIVERY INSTRUCTION TO THE BROKER ETC. D) THE ELABORATE PAPER BOOK IS FILED TO STRENGTHEN THE MATTER RELEVANT TO BOGUS CLAIM OF LTCG, AND THIS IS CLEARLY BEEN SCHEM ED AND PRE-PLANNED WITH MALAFIDE INTENTION. THEREFORE, ALL THESE DOCUM ENTS ARE NOT EVIDENCE. E) THE TRANSACTIONS ARE UNNATURAL AND HIGHLY SUSPICIOU S. THERE ARE GRAVE DOUBTS IN THE STORY PROPOUNDED BY THE ASSESSEE BEFO RE THE AUTHORITIES BELOW. BANKING DOCUMENTS ARE MERE SELF-SERVING RECI TALS. 9. THEREAFTER HE REFERRED TO A NUMBER OF JUDGMENTS REL ATING TO HUMAN BEHAVIOR AND PREPONDERANCE OF HUMAN PROBABILITIES AND UPHELD THE ADDITION MADE BY THE ASSESSING OFFICER BY RELYING ON WHAT HE CALLS RULES OF SUSPICIOUS TRANSACTIONS. 10. THE ASSESSEE IN THIS CASE HAS FILED THE FOLLOWING E VIDENCE BEFORE THE ASSESSING OFFICER IN SUPPORT OF HIS CONTENTIONS:- A) COPIES OF BILLS, EVIDENCING PURCHASE OF SHARES B) COPIES OF CONTRACT NOTES OF SALE OF SHARES C) BANK STATEMENT COPIES D) COPY OF LEDGER A/C OF BROKER E) DEMAT STATEMENT ETC. THE ASSESSING OFFICER HAS JUST RELIED ON GENERAL OB SERVATIONS. NO EVIDENCE WAS CONTROVERTED BY THE ASSESSING OFFICER. 11. THE KOLKATA BENCH OF THE ITAT IN A NUMBER OF DECISI ONS HAVE, ON SIMILAR FACTS AND CIRCUMSTANCES OF THE CASE, DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. WE LIST SOME OF THESE DECISIONS:- SHRI GAUTAM KUMAR PINCHA VS. ITO, ITA NO. 569/KOL/2 017, DT. 15/11/2017 ITO VS. SHRI SHALEEN KHEMANI, ITA NO. 1945/KOL/201 4, DT. 18/10/2017 MAHENDRA KUMAR BAID VS. ACIT, CIRCLE-35; ITA NO. 12 37/KOL/2017; ORDER DT. 18/08/2017 KIRAN KOTHARI HUF VS. ITO, ITA NO. 443/KOL/2017, OR DER DT. 15/11/2017 ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 53 THE HONBLE JURISDICTIONAL HIGH COURT ON SIMILAR FA CTS, HAD IN THE FOLLOWING CASES, UPHELD THE CLAIM OF THE ASSESSEE:- CIT VS. SHREYASHI GANGULI (ITA NO. 196 OF 2012) (CA L HC) 2012 (9) TMI 1113 CIT VS. RUNGTA PROPERTIES PRIVATE LIMITED (ITA NO. 105 OF 2016) (CAL HC)DT. 08/05/2017 CIT VS. BHAGWATI PRASAD AGARWAL (2009 TMI-34738 (CA L HC) IN ITA NO. 22 OF 2009 DATED 29.04.2009 11. RECENTLY, THE KOLKATA C BENCH OF THE TRIBUNAL IN THE CASE OF NAVNEET AGARWAL,-VS- ITO, WARD-35(3), KOLKATA; I.T.A. NO. 2 281/KOL/2017; ASSESSMENT YEAR: 2014-15, WHILE DEALING WITH IDENTICAL ISSUE OF SALE OF SHARE S OF M/S. CRESSENDA SOLUTIONS PVT. LTD., DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY RELYING UPON A PLETHORA OF JUDGMENTS OF VARIOUS COU RTS. IT HELD AS FOLLOWS:- 12. THE ASSESSING OFFICER AS WELL AS THE LD. CIT(A ) HAVE REJECTED THESE EVIDENCES FILED BY THE ASSESSEE BY REFERRING TO MODUS OPERAN DI OF PERSONS FOR EARNING LONG TERM CAPITAL GAINS WHICH HIS EXEMPT FR OM INCOME TAX. ALL THESE OBSERVATIONS ARE GENERAL IN NATURE AND ARE A PPLIED ACROSS THE BOARD TO ALL THE 60,000 OR MORE ASSESSEES WHO FALL IN THI S CATEGORY. SPECIFIC EVIDENCES PRODUCED BY THE ASSESSEE ARE NOT CONTROVE RTED BY THE REVENUE AUTHORITIES. NO EVIDENCE COLLECTED FROM THIRD PARTI ES IS CONFRONTED TO THE ASSESSES. NO OPPORTUNITY OF CROSS-EXAMINATION OF PE RSONS, ON WHOSE STATEMENTS THE REVENUE RELIES TO MAKE THE ADDITION, IS PROVIDED TO THE ASSESSEE. THE ADDITION IS MADE BASED ON A REPORT FR OM THE INVESTIGATION WING. 13. THE ISSUE FOR CONSIDERATION BEFORE US IS WHETHER, I N SUCH CASES, THE LEGAL EVIDENCE PRODUCED BY THE ASSESSEE HAS TO GUID E OUR DECISION IN THE MATTER OR THE GENERAL OBSERVATIONS BASED ON STATEME NTS, PROBABILITIES, HUMAN BEHAVIOR AND DISCOVERY OF THE MODUS OPERANDI ADOPTED IN EARNING ALLEGED BOGUS LTCG AND STCG, THAT HAVE SURFACED DUR ING INVESTIGATIONS, SHOULD GUIDE THE AUTHORITIES IN ARRIVING AT A CONCL USION AS TO WHETHER THE CLAIM IN GENUINE OR NOT. AN ALLEGED SCAM MIGHT HAVE TAKEN PLACE ON LTCG ETC. BUT IT HAS TO BE ESTABLISHED IN EACH CASE, BY THE PARTY ALLEGING SO, THAT THIS ASSESSEE IN QUESITON WAS PART OF THIS SCAM. TH E CHAIN OF EVENTS AND THE LIVE LINK OF THE ASSESEES ACTION GIVING HER IN VOLVEMENT IN THE SCAM SHOULD BE ESTABLISHED. THE ALLEGATION IMPLY THAT CA SH WAS PAID BY THE ASSESSEE AND IN RETURN THE ASSESSEE RECEIVED LTCG, WHICH IS INCOME EXEMPT FROM INCOME TAX, BY WAY OF CHEQUE THROUGH BA NKING CHANNELS. THIS ALLEGATION THAT CASH HAD CHANGED HANDS, HAS TO BE PROVED WITH EVIDENCE, BY THE REVENUE. EVIDENCE GATHERED BY THE DIRECTOR INVESTIGATIONS OFFICE BY WAY OF STATEMENTS RECORDE D ETC. HAS TO ALSO BE BROUGHT ON RECORD IN EACH CASE, WHEN SUCH A STATEME NT, EVIDENCE ETC. IS RELIED UPON BY THE REVENUE TO MAKE ANY ADDITIONS. O PPORTUNITY OF CROSS EXAMINATION HAS TO BE PROVIDED TO THE ASSESEE, IF T HE AO RELIES ON ANY STATEMENTS OR THIRD PARTY AS EVIDENCE TO MAKE AN AD DITION. IF ANY MATERIAL OR EVIDENCE IS SOUGHT TO BE RELIED UPON BY THE AO, HE HAS TO CONFRONT THE ASSESSEE WITH SUCH MATERIAL. THE CLAIM OF THE ASSES SEE CANNOT BE REJECTED BASED ON MERE CONJECTURES UNVERIFIED BY EVIDENCE UN DER THE PRETENTIOUS GARB OF PREPONDERANCE OF HUMAN PROBABILITIES AND TH EORY OF HUMAN ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 54 BEHAVIOR BY THE DEPARTMENT. 14. IT IS WELL SETTLED THAT EVIDENCE COLLECTED FROM THI RD PARTIES CANNOT BE USED AGAINST AN ASSESSEE UNLESS THIS EVIDENCE IS PU T BEFORE HIM AND HE IS GIVEN AN OPPORTUNITY TO CONTROVERT THE EVIDENCE. IN THIS CASE, THE AO RELIES ONLY ON A REPORT AS THE BASIS FOR THE ADDITION. THE EVIDENCE BASED ON WHICH THE DDIT REPORT IS PREPARED IS NOT BROUGHT ON RECORD BY THE AO NOR IS IT PUT BEFORE THE ASSESSEE. THE SUBMISSION OF TH E ASSESSEE THAT SHE IS JUST AN INVESTOR AND AS SHE RECEIVED SOME TIPS AND SHE CHOSE TO INVEST BASED ON THESE MARKET TIPS AND HAD TAKEN A CALCULAT ED RISK AND HAD GAINED IN THE PROCESS AND THAT SHE IS NOT PARTY TO THE SCAM ETC., HAS TO BE CONTROVERTED BY THE REVENUE WITH EVIDENCE. WHEN A P ERSON CLAIMS THAT SHE HAS DONE THESE TRANSACTIONS IN A BONA FIDE AND GENUINE MANNER AND WAS BENEFITTED, ONE CANNOT REJECT THIS SUBMISSION B ASED ON SURMISES AND CONJECTURES. AS THE REPORT OF INVESTIGATION WING SU GGESTS, THERE ARE MORE THAN 60,000 BENEFICIARIES OF LTCG. EACH CASE HAS TO BE ASSESSED BASED ON LEGAL PRINCIPLES OF LEGAL IMPORT LAID DOWN BY THE C OURTS OF LAW. 15. IN OUR VIEW MODUS OPERANDI, GENERALISATION, PREPOND ERANCE OF HUMAN PROBABILITIES CANNOT BE THE ONLY BASIS FOR RE JECTING THE CLAIM OF THE ASSESSEE. UNLESS SPECIFIC EVIDENCE IS BROUGHT ON RE CORD TO CONTROVERT THE VALIDITY AND CORRECTNESS OF THE DOCUMENTARY EVIDENC ES PRODUCED, THE SAME CANNOT BE REJECTED BY THE ASSESSEE. THE HON'BLE SUP REME COURT IN THE CASE OF OMAR SALAV MOHAMED SAIT REPORTED IN (1959) 37 IT R 151 (S C) HAD HELD THAT NO ADDITION CAN BE MADE ON THE BASIS OF SURMIS ES, SUSPICION AND CONJECTURES. IN THE CASE OF CIT(CENTRAL), KOLKATA V S. DAULAT RAM RAWATMULL REPORTED IN 87 ITR 349, THE HON'BLE SUPREME COURT H ELD THAT, THE ONUS TO PROVE THAT THE APPARENT IS NOT THE REAL IS ON THE P ARTY WHO CLAIMS IT TO BE SO. THE BURDEN OF PROVING A TRANSACTION TO BE BOGUS HAS TO BE STRICTLY DISCHARGED BY ADDUCING LEGAL EVIDENCES, WHICH WOULD DIRECTLY PROVE THE FACT OF BOGUSNESS OR ESTABLISH CIRCUMSTANCE UNERRIN GLY AND REASONABLY RAISING AN INTERFERENCE TO THAT EFFECT. THE HON'BLE SUPREME COURT IN THE CASE OF UMACHARAN SHAH & BROS. VS. CIT 37 ITR 271 H ELD THAT SUSPICION HOWEVER STRONG, CANNOT TAKE THE PLACE OF EVIDENCE. 16. WE FIND THAT THE ASSESSING OFFICER AS WELL AS THE L D. CIT(A) HAS BEEN GUIDED BY THE REPORT OF THE INVESTIGATION WING PREP ARED WITH RESPECT TO BOGUS CAPITAL GAINS TRANSACTIONS. HOWEVER WE DO NOT FIND THAT, THE ASSESSING OFFICER AS WELL AS THE LD. CIT(A), HAVE B ROUGHT OUT ANY PART OF THE INVESTIGATION WING REPORT IN WHICH THE ASSESSEE HAS BEEN INVESTIGATED AND /OR FOUND TO BE A PART OF ANY ARRANGEMENT FOR THE P URPOSE OF GENERATING BOGUS LONG TERM CAPITAL GAINS. NOTHING HAS BEEN BRO UGHT ON RECORD TO SHOW THAT THE PERSONS INVESTIGATED, INCLUDING ENTRY OPERATORS OR STOCK BROKERS, HAVE NAMED THAT THE ASSESSEE WAS IN COLLUS ION WITH THEM. IN ABSENCE OF SUCH FINDING HOW IS IT POSSIBLE TO LINK THEIR WRONG DOINGS WITH THE ASSESSEE. IN FACT THE INVESTIGATION WING IS A S EPARATE DEPARTMENT WHICH HAS NOT BEEN ASSIGNED ASSESSMENT WORK AND HAS BEEN DELEGATED THE WORK OF ONLY MAKING INVESTIGATION. THE ACT HAS VESTED WIDEST POWERS ON THIS WING. IT IS THE DUTY OF THE INVESTIGATION W ING TO CONDUCT PROPER AND ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 55 DETAILED INQUIRY IN ANY MATTER WHERE THERE IS ALLEG ATION OF TAX EVASION AND AFTER MAKING PROPER INQUIRY AND COLLECTING PROPER E VIDENCES THE MATTER SHOULD BE SENT TO THE ASSESSMENT WING TO ASSESS THE INCOME AS PER LAW. WE FIND NO SUCH ACTION EXECUTED BY INVESTIGATION WI NG AGAINST THE ASSESSEE. IN ABSENCE OF ANY FINDING SPECIFICALLY AG AINST THE ASSESSEE IN THE INVESTIGATION WING REPORT, THE ASSESSEE CANNOT BE H ELD TO BE GUILTY OR LINKED TO THE WRONG ACTS OF THE PERSONS INVESTIGATE D. IN THIS CASE, IN OUR VIEW, THE ASSESSING OFFICER AT BEST COULD HAVE CONS IDERED THE INVESTIGATION REPORT AS A STARTING POINT OF INVESTIGATION. THE RE PORT ONLY INFORMED THE ASSESSING OFFICER THAT SOME PERSONS MAY HAVE MISUSE D THE SCRIPT FOR THE PURPOSE OF COLLUSIVE TRANSACTION. THE ASSESSING OFF ICER WAS DUTY BOUND TO MAKE INQUIRY FROM ALL CONCERNED PARTIES RELATING TO THE TRANSACTION AND THEN TO COLLECT EVIDENCES THAT THE TRANSACTION ENTE RED INTO BY THE ASSESSEE WAS ALSO A COLLUSIVE TRANSACTION. WE, HOWEVER, FIND THAT THE ASSESSING OFFICER HAS NOT BROUGHT ON RECORD ANY EVIDENCE TO P ROVE THAT THE TRANSACTIONS ENTERED BY THE ASSESSEE WHICH ARE OTHE RWISE SUPPORTED BY PROPER THIRD PARTY DOCUMENTS ARE COLLUSIVE TRANSACT IONS. 17. THE HONBLE SUPREME COURT WAY BACK IN THE CASE OF L ALCHAND BHAGAT AMBICA RAM VS. CIT [1959] 37 ITR 288 (SC) HELD THAT ASSESSMENT COULD NOT BE BASED ON BACKGROUND OF SUSPICION AND IN ABSENCE OF ANY EVIDENCE TO SUPPORT THE SAME. THE HONBLE COURT HELD: ADVERTING TO THE VARIOUS PROBABILITIES WHICH WEIGH ED WITH THE INCOME-TAX OFFICER WE MAY OBSERVE THAT THE NOTORIETY FOR SMUGG LING FOOD GRAINS AND OTHER COMMODITIES TO BENGAL BY COUNTRY B OATS ACQUIRED BY SAHIBGUNJ AND THE NOTORIETY ACHIEVED BY DHULIAN AS A GREAT RECEIVING CENTRE FOR SUCH COMMODITIES WERE MERELY A BACKGROUND OF SUSPICION AND THE APPELLANT COULD NOT BE TARRED WITH THE SAME BRUSH AS EVERY ARHATDAR AND GRAIN MERCHANT WHO MIGH T HAVE BEEN INDULGING IN SMUGGLING OPERATIONS, WITHOUT AN IOTA OF EVIDENCE IN THAT BEHALF. THE CANCELLATION OF THE FOOD GRAIN LIC ENCE AT NAWGACHIA AND THE PROSECUTION OF THE APPELLANT UNDE R THE DEFENCE OF INDIA RULES WAS ALSO OF NO CONSEQUENCE I NASMUCH AS THE APPELLANT WAS ACQUITTED OF THE OFFENCE WITH WHI CH IT HAD BEEN CHARGED AND ITS LICENCE ALSO WAS RESTORED. THE MERE POSSIBILITY OF THE APPELLANT EARNING CONSIDERABLE AMOUNTS IN THE Y EAR UNDER CONSIDERATION WAS A PURE CONJECTURE ON THE PART OF THE INCOME-TAX OFFICER AND THE FACT THAT THE APPELLANT INDULGED IN SPECULATION (IN KALAI ACCOUNT) COULD NOT LEGITIMATELY LEAD TO THE I NFERENCE THAT THE PROFIT IN A SINGLE TRANSACTION OR IN A CHAIN OF TRA NSACTIONS COULD EXCEED THE AMOUNTS, INVOLVED IN THE HIGH DENOMINATI ON NOTES,--- THIS ALSO WAS A PURE CONJECTURE OR SURMISE ON THE P ART OF THE INCOME-TAX OFFICER. AS REGARDS THE DISCLOSED VOLUME OF BUSINESS IN THE YEAR UNDER CONSIDERATION IN THE HEAD OFFICE AND IN BRANCHES THE INCOME-TAX OFFICER INDULGED IN SPECULATION WHEN HE TALKED OF THE POSSIBILITY OF THE APPELLANT EARNING A CONSIDERABLE SUM AS AGAINST WHICH IT SHOWED A NET LOSS OF ABOUT RS. 45,000. THE INCOME-TAX OFFICER INDICATED THE PROBABLE SOURCE OR SOURCES FR OM WHICH THE ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 56 APPELLANT COULD HAVE EARNED A LARGE AMOUNT IN THE S UM OF RS. 2,91,000 BUT THE CONCLUSION WHICH HE ARRIVED AT IN REGARD TO THE APPELLANT HAVING EARNED THIS LARGE AMOUNT DURING TH E YEAR AND WHICH ACCORDING TO HIM REPRESENTED THE SECRETED PRO FITS OF THE APPELLANT IN ITS BUSINESS WAS THE RESULT OF PURE CO NJECTURES AND SURMISES ON HIS PART AND HAD NO FOUNDATION IN FACT AND WAS NOT PROVED AGAINST THE APPELLANT ON THE RECORD OF THE P ROCEEDINGS. IF THE CONCLUSION OF THE INCOME-TAX OFFICER WAS THUS E ITHER PERVERSE OR VITIATED BY SUSPICIONS, CONJECTURES OR SURMISES, THE FINDING OF THE TRIBUNAL WAS EQUALLY PERVERSE OR VITIATED IF THE TR IBUNAL TOOK COUNT OF ALL THESE PROBABILITIES AND WITHOUT ANY RHYME OR REASON AND MERELY BY A RULE OF THUMB, AS IT WERE, CAME TO THE CONCLUSION THAT THE POSSESSION OF 150 HIGH DENOMINATION NOTES OF RS . 1,000 EACH WAS SATISFACTORILY EXPLAINED BY THE APPELLANT BUT N OT THAT OF THE BALANCE OF 141 HIGH DENOMINATION NOTES OF RS. 1,000 EACH. THE OBSERVATIONS OF THE HONBLE APEX COURT ARE EQUA LLY APPLICABLE TO THE CASE OF THE ASSESSEE. IN OUR VIEW THE ASSESSING OFFICER HAV ING FAILED TO BRING ON RECORD ANY MATERIAL TO PROVE THAT THE TRANSACTION O F THE ASSESSEE WAS A COLLUSIVE TRANSACTION COULD NOT HAVE REJECTED THE E VIDENCES SUBMITTED BY THE ASSESSEE. IN FACT IN THIS CASE NOTHING HAS BEEN FOUND AGAINST THE ASSESSEE WITH AID OF ANY DIRECT EVIDENCES OR MATERI AL AGAINST THE ASSESSEE DESPITE THE MATTER BEING INVESTIGATED BY VARIOUS WI NGS OF THE INCOME TAX DEPARTMENT HENCE IN OUR VIEW UNDER THESE CIRCUMSTAN CES NOTHING CAN BE IMPLICATED AGAINST THE ASSESSEE. 18. WE NOW CONSIDER THE VARIOUS PROPOSITIONS OF LAW LAI D DOWN BY THE COURTS OF LAW. THAT CROSS-EXAMINATION IS ONE PART O F THE PRINCIPLES OF NATURAL JUSTICE HAS BEEN LAID DOWN IN THE FOLLOWING JUDGMENTS: A) AYAAUBKHAN NOORKHAN PATHAN VS. THE STATE OF MAHARAS HTRA AND ORS. 23. A CONSTITUTION BENCH OF THIS COURT IN STATE OF M.P. V. CHINTAMAN SADASHIVA VAISHAMPAYAN AIR 1961 SC 1623, HELD THAT THE RULES OF NATURAL JUSTICE, REQUIRE THAT A PARTY MUST BE GIVEN THE OPPORTUNITY TO ADDUCE ALL RELEVANT EVIDENCE UPON WHICH HE RELIE S, AND FURTHER THAT, THE EVIDENCE OF THE OPPOSITE PARTY SHOULD BE TAKEN IN HIS PRESENCE, AND THAT HE SHOULD BE GIVEN THE OPPORTUNI TY OF CROSS- EXAMINING THE WITNESSES EXAMINED BY THAT PARTY. NOT PROVIDING THE SAID OPPORTUNITY TO CROSS-EXAMINE WITNESSES, WOULD VIOLATE THE PRINCIPLES OF NATURAL JUSTICE. (SEE ALSO: UNION OF INDIA V. T.R. VARMA, AIR 1957 SC 882; MEENGLAS TEA ESTATE V. WORKMEN, AI R 1963 SC 1719; M/S. KESORAM COTTON MILLS LTD. V. GANGADHAR A ND ORS. ,AIR 1964 SC 708; NEW INDIA ASSURANCE CO. LTD. V. NUSLI NEVILLE WADIA AND ANR. AIR 2008 SC 876; RACHPAL SINGH AND ORS. V. GURMIT SINGH AND ORS. AIR 2009 SC 2448; BIECCO LAWRIE AND ANR. V . STATE OF WEST BENGAL AND ANR. AIR 2010 SC 142; AND STATE OF UTTAR PRADESH V. SAROJ KUMAR SINHA AIR 2010 SC 3131). ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 57 24. IN LAKSHMAN EXPORTS LTD. V. COLLECTOR OF CENTRA L EXCISE (2005) 10 SCC 634, THIS COURT, WHILE DEALING WITH A CASE UNDER TH E CENTRAL EXCISE ACT, 1944, CONSIDERED A SIMILAR ISSUE I.E. PERMISSI ON WITH RESPECT TO THE CROSS-EXAMINATION OF A WITNESS. IN THE SAID CAS E, THE ASSESSEE HAD SPECIFICALLY ASKED TO BE ALLOWED TO CROSS-EXAMI NE THE REPRESENTATIVES OF THE FIRMS CONCERN, TO ESTABLISH THAT THE GOODS IN QUESTION HAD BEEN ACCOUNTED FOR IN THEIR BOOKS OF A CCOUNTS, AND THAT EXCISE DUTY HAD BEEN PAID. THE COURT HELD THAT SUCH A REQUEST COULD NOT BE TURNED DOWN, AS THE DENIAL OF THE RIGH T TO CROSS- EXAMINE, WOULD AMOUNT TO A DENIAL OF THE RIGHT TO BE HEARD I.E. AUDI ALTERAM PARTEM. 28. THE MEANING OF PROVIDING A REASONABLE OPPORTUNITY T O SHOW CAUSE AGAINST AN ACTION PROPOSED TO BE TAKEN BY THE GOVERNMENT, IS THAT THE GOVERNMENT SERVANT IS AFFORDED A REASON ABLE OPPORTUNITY TO DEFEND HIMSELF AGAINST THE CHARGES, ON THE BASIS OF WHICH AN INQUIRY IS HELD. THE GOVERNMENT SERVANT SH OULD BE GIVEN AN OPPORTUNITY TO DENY HIS GUILT AND ESTABLISH HIS INNOCENCE. HE CAN DO SO ONLY WHEN HE IS TOLD WHAT THE CHARGES AGA INST HIM ARE. HE CAN THEREFORE, DO SO BY CROSS-EXAMINING THE WITN ESSES PRODUCED AGAINST HIM. THE OBJECT OF SUPPLYING STATEMENTS IS THAT, THE GOVERNMENT SERVANT WILL BE ABLE TO REFER TO THE PRE VIOUS STATEMENTS OF THE WITNESSES PROPOSED TO BE EXAMINED AGAINST HIM. UNLESS THE SAID STATEMENTS ARE PROVIDED TO THE GOVE RNMENT SERVANT, HE WILL NOT BE ABLE TO CONDUCT AN EFFECTIV E AND USEFUL CROSS-EXAMINATION. 29. IN RAJIV ARORA V. UNION OF INDIA AND ORS. AIR 2009 SC 1100, THIS COURT HELD: EFFECTIVE CROSS-EXAMINATION COULD HAVE BEEN DONE AS REGARDS THE CORRECTNESS OR OTHERWISE OF THE REPORT, IF THE CONTENTS OF THEM WERE PROVED. THE PRINCIPLES ANALOGOUS TO TH E PROVISIONS OF THE INDIAN EVIDENCE ACT AS ALSO THE PRINCIPLES OF N ATURAL JUSTICE DEMAND THAT THE MAKER OF THE REPORT SHOULD BE EXAMI NED, SAVE AND EXCEPT IN CASES WHERE THE FACTS ARE ADMITTED OR THE WITNESSES ARE NOT AVAILABLE FOR CROSS-EXAMINATION OR SIMILAR SITUATION. THE HIGH COURT IN ITS IMPUGNED JUDGMENT PROCEEDED TO CO NSIDER THE ISSUE ON A TECHNICAL PLEA, NAMELY, NO PREJUDICE HAS BEEN CAUSED TO THE APPELLANT BY SUCH NON- EXAMINATION. IF THE BASI C PRINCIPLES OF LAW HAVE NOT BEEN COMPLIED WITH OR THERE HAS BEEN A GROSS VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE, THE HIGH COURT SHOULD HAVE EXERCISED ITS JURISDICTION OF JUDICIAL REVIEW. 30. THE AFORESAID DISCUSSION MAKES IT EVIDENT THAT, NOT ONLY SHOULD THE OPPORTUNITY OF CROSS-EXAMINATION BE MADE AVAILA BLE, BUT IT SHOULD BE ONE OF EFFECTIVE CROSS-EXAMINATION, SO AS TO MEET THE REQUIREMENT OF THE PRINCIPLES OF NATURAL JUSTICE. I N THE ABSENCE OF SUCH AN OPPORTUNITY, IT CANNOT BE HELD THAT THE MAT TER HAS BEEN DECIDED IN ACCORDANCE WITH LAW, AS CROSS-EXAMINATIO N IS AN INTEGRAL PART AND PARCEL OF THE PRINCIPLES OF NATUR AL JUSTICE. B) ANDAMAN TIMBER INDUSTRIES VS. COMMISSIONER OF C. EX ., KOLKATA-II WHEREIN IT WAS HELD THAT: ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 58 4. WE HAVE HEARD MR. KAVIN GULATI, LEARNED SENIOR COUNSEL APPEARING FOR THE ASSESSEE, AND MR. K. RADHAKRISHNAN, LEARNED SENIOR COUNSEL WHO APPEARED FOR THE REVENUE. 5. ACCORDING TO US, NOT ALLOWING THE ASSESSEE TO CROSS -EXAMINE THE WITNESSES BY THE ADJUDICATING AUTHORITY THOUGH THE STATEMENTS OF THOSE WITNESSES WERE MADE THE BASIS OF THE IMPUGNED ORDER IS A SERIOUS FLAW WHICH MAKES THE ORDER NULLITY INASMUCH AS IT AMOUNTED TO VIOLATION OF PRINCIPLES OF NATURAL JUST ICE BECAUSE OF WHICH THE ASSESSEE WAS ADVERSELY AFFECTED. IT IS TO BE BORNE IN MIND THAT THE ORDER OF THE COMMISSIONER WAS BASED U PON THE STATEMENTS GIVEN BY THE AFORESAID TWO WITNESSES. EV EN WHEN THE ASSESSEE DISPUTED THE CORRECTNESS OF THE STATEMENTS AND WANTED TO CROSS-EXAMINE, THE ADJUDICATING AUTHORITY DID NO T GRANT THIS OPPORTUNITY TO THE ASSESSEE. IT WOULD BE PERTINENT TO NOTE THAT IN THE IMPUGNED ORDER PASSED BY THE ADJUDICATING AUTHO RITY HE HAS SPECIFICALLY MENTIONED THAT SUCH AN OPPORTUNITY WAS SOUGHT BY THE ASSESSEE. HOWEVER, NO SUCH OPPORTUNITY WAS GRANTED AND THE AFORESAID PLEA IS NOT EVEN DEALT WITH BY THE ADJUDI CATING AUTHORITY. AS FAR AS THE TRIBUNAL IS CONCERNED, WE FIND THAT R EJECTION OF THIS PLEA IS TOTALLY UNTENABLE. THE TRIBUNAL HAS SIMPLY STATED THAT CROSS- EXAMINATION OF THE SAID DEALERS COULD NOT HAVE BROU GHT OUT ANY MATERIAL WHICH WOULD NOT BE IN POSSESSION OF THE AP PELLANT THEMSELVES TO EXPLAIN AS TO WHY THEIR EX-FACTORY PR ICES REMAIN STATIC. IT WAS NOT FOR THE TRIBUNAL TO HAVE GUESS W ORK AS TO FOR WHAT PURPOSES THE APPELLANT WANTED TO CROSS-EXAMINE THOS E DEALERS AND WHAT EXTRACTION THE APPELLANT WANTED FROM THEM. 6. AS MENTIONED ABOVE, THE APPELLANT HAD CONTESTED THE TRUTHFULNESS OF THE STATEMENTS OF THESE TWO WITNESS ES AND WANTED TO DISCREDIT THEIR TESTIMONY FOR WHICH PURPOSE IT W ANTED TO AVAIL THE OPPORTUNITY OF CROSS-EXAMINATION. THAT APART, T HE ADJUDICATING AUTHORITY SIMPLY RELIED UPON THE PRICE LIST AS MAIN TAINED AT THE DEPOT TO DETERMINE THE PRICE FOR THE PURPOSE OF LEV Y OF EXCISE DUTY. WHETHER THE GOODS WERE, IN FACT, SOLD TO THE SAID D EALERS/WITNESSES AT THE PRICE WHICH IS MENTIONED IN THE PRICE LIST I TSELF COULD BE THE SUBJECT MATTER OF CROSS-EXAMINATION. THEREFORE, IT WAS NOT FOR THE ADJUDICATING AUTHORITY TO PRESUPPOSE AS TO WHAT COU LD BE THE SUBJECT MATTER OF THE CROSS- EXAMINATION AND MAKE T HE REMARKS AS MENTIONED ABOVE. WE MAY ALSO POINT OUT THAT ON AN E ARLIER OCCASION WHEN THE MATTER CAME BEFORE THIS COURT IN CIVIL APPEAL NO. 2216 OF 2000, ORDER DATED 17-3-2005 [2005 (187) E.L.T. A33 (S.C.)] WAS PASSED REMITTING THE CASE BACK TO THE T RIBUNAL WITH THE DIRECTIONS TO DECIDE THE APPEAL ON MERITS GIVING IT S REASONS FOR ACCEPTING OR REJECTING THE SUBMISSIONS. ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 59 7. IN VIEW THE ABOVE, WE ARE OF THE OPINION THAT IF TH E TESTIMONY OF THESE TWO WITNESSES IS DISCREDITED, THERE WAS NO MA TERIAL WITH THE DEPARTMENT ON THE BASIS OF WHICH IT COULD JUSTIFY I TS ACTION, AS THE STATEMENT OF THE AFORESAID TWO WITNESSES WAS THE ON LY BASIS OF ISSUING THE SHOW CAUSE NOTICE. 19. ON SIMILAR FACTS WHERE THE REVENUE HAS ALLEGED THAT THE ASSESSEE HAS DECLARED BOGUS LTCG, IT WAS HELD AS FOLLOWS: A) THE CALCUTTA HIGH COURT IN THE CASE OF BLB CABLES & CONDUCTORS [ITA NO. 78 OF 2017] DATED 19.06.2018. THE HIGH COURT HELD VIDE PARA 4.1: WE FIND THAT ALL THE TRANSACTIONS THROUGH THE BROKER WERE DULY RECORDED IN THE BOOKS OF THE ASSESSEE. THE BRO KER HAS ALSO DECLARED IN ITS BOOKS OF ACCOUNTS AND OFFERED FOR TAXATION. IN OUR VIEW TO HOLD A TRANSACTION AS BOGU S, THERE HAS TO BE SOME CONCRETE EVIDENCE WHERE THE TRANSACT IONS CANNOT BE PROVED WITH THE SUPPORTIVE EVIDENCE. HERE IN THE CASE THE TRANSACTIONS OF THE COMMODITY EXCHANGED HA VE NOT ONLY BEEN EXPLAINED BUT ALSO SUBSTANTIATED FROM THE CONFIRMATION OF THE PARTY. BOTH THE PARTIES ARE CON FIRMING THE TRANSACTIONS WHICH HAVE BEEN DULY SUPPORTED WIT H THE BOOKS OF ACCOUNTS AND BANK TRANSACTIONS. THE LD. AR HAS ALSO SUBMITTED THE BOARD RESOLUTION FOR THE TRADING OF COMMODITY TRANSACTION. THE BROKER WAS EXPELLED FROM THE COMMODITY EXCHANGE CANNOT BE THE CRITERIA TO HOLD T HE TRANSACTION AS BOGUS. IN VIEW OF ABOVE, WE REVERSE THE ORDER OF THE LOWER AUTHORITIES AND ALLOW THE COMMON GROUNDS OF ASSESSEES APPEAL. [ QUOTED VERBATIM ] THIS IS ESSENTIALLY A FINDING OF THE TRIBUNAL ON FA CT. NO MATERIAL HAS BEEN SHOWN TO US WHO WOULD NEGATE THE TRIBUNALS FI NDING THAT OFF MARKET TRANSACTIONS ARE NOT PROHIBITED. AS REGARDS VERACITY OF THE TRANSACTIONS, THE TRIBUNAL HAS COME TO ITS CONCLUSION ON ANALYSIS OF RELEVANT MATERIALS. THAT BEING THE POSITION, TRIBUNAL HAVING ANALYZED THE SET OF FACTS IN COMING TO ITS FINDING, WE DO NOT THINK THERE IS ANY SCOPE OF INTERFERENCE WITH THE ORDER OF THE TRIBUNAL IN EXER CISE OF OUR JURISDICTION UNDER SECTION 260A OF THE INCOME TAX A CT, 1961. NO SUBSTANTIAL QUESTION OF LAW IS INVOLVED IN THIS APPEAL. THE APPEAL AND THE STAY PETITION, ACCORDING LY, SHALL STAND DISMISSED. B) THE JAIPUR ITAT IN THE CASE OF VIVEK AGARWAL [ITA N O. 292/JP/2017] ORDER DATED 06.04.2018 HELD AS UNDER V IDE PAGE 9 PARA 3: WE HOLD THAT THE ADDITION MADE BY THE AO IS MERELY BASED ON SUSPICION AND SURMISES WITHOUT ANY COGENT MATERIAL TO CONTROV ERT THE EVIDENCE FILED BY THE ASSESSEE IN SUPPORT OF THE CL AIM. FURTHER, THE AO HAS ALSO FAILED TO ESTABLISH THAT THE ASSESSEE H AS BROUGHT BACK ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 60 HIS UNACCOUNTED INCOME IN THE SHAPE OF LONG TERM CA PITAL GAIN. HENCE WE DELETE THE ADDITION MADE BY THE AO ON THIS ACCOUNT. C) THE HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CA SE OF PREM PAL GANDHI [ITA-95-2017 (O&M)] DATED 18.01.2018 AT VIDE PAGE 3 PARA 4 HELD AS UNDER: .. THE ASSESSING OFFICER IN BOTH THE CASES ADDED THE APPRECIATION TO THE ASSESSEES INCOME ON THE SUSPICION THAT THESE WERE FICTITIOUS TRANSACTIONS AND THAT THE APPRECIATION ACTUALLY REP RESENTED THE ASSESSEES INCOME FROM UNDISCLOSED SOURCES. IN ITA -18-2017 ALSO THE CIT (APPEALS) AND THE TRIBUNAL HELD THAT THE AS SESSING OFFICER HAD NOT PRODUCED ANY EVIDENCE WHATSOEVER IN SUPPORT OF THE SUSPICION. ON THE OTHER HAND, ALTHOUGH THE APPRECIA TION IS VERY HIGH, THE SHARES WERE TRADED ON THE NATIONAL STOCK EXCHANGE AND THE PAYMENTS AND RECEIPTS WERE ROUTED THROUGH THE B ANK. THERE WAS NO EVIDENCE TO INDICATE FOR INSTANCE THAT THIS WAS A CLOSELY HELD COMPANY AND THAT THE TRADING ON THE NATIONAL S TOCK EXCHANGE WAS MANIPULATED IN ANY MANNER. THE COURT ALSO HELD THE FOLLOWING VIDE PAGE 3 PARA 5 THE FOLLOWING: QUESTION (IV) HAS BEEN DEALT WITH IN DETAIL BY THE CIT (APPEALS) AND THE TRIBUNAL. FIRSTLY, THE DOCUMENTS ON WHICH T HE ASSESSING OFFICER RELIED UPON IN THE APPEAL WERE NO T PUT TO THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS. THE CIT (APPEALS) NEVERTHELESS CONSIDERED THEM IN DETAIL AN D FOUND THAT THERE WAS NO CO-RELATION BETWEEN THE AMOUNTS S OUGHT TO BE ADDED AND THE ENTRIES IN THOSE DOCUMENTS. THI S WAS ON AN APPRECIATION OF FACTS. THERE IS NOTHING TO IN DICATE THAT THE SAME WAS PERVERSE OR IRRATIONAL. ACCORDING LY, NO QUESTION OF LAW ARISES. D) THE BENCH D OF KOLKATA ITAT IN THE CASE OF GAUTAM PINCHA [ITA NO.569/KOL/2017] ORDER DATED 15.11.2017 HELD AS UND ER VIDE PAGE 12 PARA 8.1: IN THE LIGHT OF THE DOCUMENTS STATED I.E. (I TO XI V) IN PARA 6(SUPRA) WE FIND THAT THERE IS ABSOLUTELY NO ADVERSE MATERIAL TO IMP LICATE THE ASSESSEE TO HAVE ENTERED GAMUT OF UNFOUNDED/UNWARRA NTED ALLEGATIONS LEVELED BY THE AO AGAINST THE ASSESSEE, WHICH IN OUR CONSIDERED OPINION HAS NO LEGS TO STAND AND THEREFO RE HAS TO FALL. WE TAKE NOTE THAT THE LD. DR COULD NOT CONTROVERT T HE FACTS SUPPORTED WITH MATERIAL EVIDENCES WHICH ARE ON RECO RD AND COULD ONLY RELY ON THE ORDERS OF THE AO/CIT (A). WE NOTE THAT IN THE ABSENCE OF MATERIAL/EVIDENCE THE ALLEGATIONS THAT T HE ASSESSEE/BROKERS GOT INVOLVED IN PRICE RIGGING/MANI PULATION OF SHARES MUST THEREFORE ALSO FAIL. AT THE COST OF REP ETITION, WE NOTE THAT THE ASSESSEE HAD FURNISHED ALL RELEVANT EVIDEN CE IN THE FORM OF BILLS, CONTRACT NOTES, DEMAT STATEMENT AND BANK ACC OUNT TO PROVE THE GENUINENESS OF THE TRANSACTIONS RELEVANT TO THE PURCHASE AND SALE OF SHARES RESULTING IN LONG TERM CAPITAL GAIN. THESE EVIDENCES WERE NEITHER FOUND BY THE AO NOR BY THE LD. CIT (A) TO BE FALSE OR ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 61 FICTITIOUS OR BOGUS. THE FACTS OF THE CASE AND THE EVIDENCE IN SUPPORT OF THE EVIDENCE CLEARLY SUPPORT THE CLAIM O F THE ASSESSEE THAT THE TRANSACTIONS OF THE ASSESSEE WERE GENUINE AND THE AUTHORITIES BELOW WAS NOT JUSTIFIED IN REJECTING TH E CLAIM OF THE ASSESSEE THAT INCOME FROM LTCG IS EXEMPTED U/S 10(3 8) OF THE ACT. FURTHER IN PAGE 15 PARA 8.5 OF THE JUDGMENT, IT HEL D: WE NOTE THAT THE LD. AR CITED PLETHORA OF THE CASE LAWS TO BOLSTER IS CLAIM WHICH ARE NOT BEING REPEATED AGAIN SINCE IT HAS ALR EADY BEEN INCORPORATED IN THE SUBMISSIONS OF THE LD. AR (SUPR A) AND HAVE BEEN DULY CONSIDERED BY US TO ARRIVE AT OUR CONCLUS ION. THE LD. DR COULD NOT BRING TO OUR NOTICE ANY CASE LAWS TO SUPP ORT THE IMPUGNED DECISION OF THE LD. CIT (A)/AO. IN THE AFO RESAID FACTS AND CIRCUMSTANCES OF THE CASE, WE HOLD THAT THE LD. CIT (A) WAS NOT JUSTIFIED IN UPHOLDING THE ADDITION OF SALE PROCEED S OF THE SHARES AS UNDISCLOSED INCOME OF THE ASSESSEE U/S 68 OF THE AC T. WE, THEREFORE, DIRECT THE AO TO DELETE THE ADDITION. E) THE BENCH D OF KOLKATA ITAT IN THE CASE OF KIRAN KOTHARI HUF [ ITA NO. 443/KOL/2017 ] ORDER DATED 15.11.2017 HELD VIDE PARA 9.3 HELD AS UNDER: .. WE FIND THAT THERE IS ABSOLUTELY NO ADVERSE M ATERIAL TO IMPLICATE THE ASSESSEE TO THE ENTIRE GAMUT OF UNFOUNDED/UNWARRANT ED ALLEGATIONS LEVELED BY THE AO AGAINST THE ASSESSEE, WHICH IN OUR CONSIDERED OPINION HAS NO LEGS TO STAND AND THEREFO RE HAS TO FALL. WE TAKE NOTE THAT THE LD. DR COULD NOT CONTROVERT T HE FACTS WHICH ARE SUPPORTED WITH MATERIAL EVIDENCES FURNISHED BY THE ASSESSEE WHICH ARE ON RECORD AND COULD ONLY RELY ON THE ORDE RS OF THE AO/CIT(A). WE NOTE THAT THE ALLEGATIONS THAT THE AS SESSEE/BROKERS GOT INVOLVED IN PRICE RIGGING/MANIPULATION OF SHAR ES MUST THEREFORE CONSEQUENTLY FAIL. AT THE COST OF REPETIT ION, WE NOTE THAT THE ASSESSEE HAD FURNISHED ALL RELEVANT EVIDENCE IN THE FORM OF BILLS, CONTRACT NOTES, DEMAT STATEMENT AND BANK ACC OUNT TO PROVE THE GENUINENESS OF THE TRANSACTIONS RELEVANT TO THE PURCHASE AND SALE OF SHARES RESULTING IN LONG TERM CAPITAL GAIN. NEITHER THESE EVIDENCES WERE FOUND BY THE AO NOR BY THE LD. CIT(A ) TO BE FALSE OR FICTITIOUS OR BOGUS. THE FACTS OF THE CASE AND THE EVIDENCE IN SUPPORT OF THE EVIDENCE CLEARLY SUPPORT THE CLAIM O F THE ASSESSEE THAT THE TRANSACTIONS OF THE ASSESSEE WERE GENUINE AND THE AUTHORITIES BELOW WAS NOT JUSTIFIED IN REJECTING TH E CLAIM OF THE ASSESSEE EXEMPTED U/S 10(38) OF THE ACT ON THE BASI S OF SUSPICION, SURMISES AND CONJECTURES. IT IS TO BE KEPT IN MIND THAT SUSPICION HOW SO EVER STRONG, CANNOT PARTAKE THE CHARACTER OF LEGAL EVIDENCE. IT FURTHER HELD AS FOLLOWS: WE NOTE THAT THE LD. AR CITED PLETHORA OF THE CASE LAWS TO BOLSTER HIS CLAIM WHICH ARE NOT BEING REPEATED AGAIN SINCE IT H AS ALREADY BEEN INCORPORATED IN THE SUBMISSIONS OF THE LD. AR (SUPR A) AND HAVE ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 62 BEEN DULY CONSIDERED TO ARRIVE AT OUR CONCLUSION. T HE LD. DR COULD NOT BRING TO OUR NOTICE ANY CASE LAWS TO SUPPORT TH E IMPUGNED DECISION OF THE LD. CIT(A)/AO. IN THE AFORESAID FAC TS AND CIRCUMSTANCES OF THE CASE, WE HOLD THAT THE LD. CIT (A) WAS NOT JUSTIFIED IN UPHOLDING THE ADDITION OF SALE PROCEED S OF THE SHARES AS UNDISCLOSED INCOME OF THE ASSESSEE U/S 68 OF THE AC T. WE THEREFORE DIRECT THE AO TO DELETE THE ADDITION. F) THE BENCH A OF KOLKATA ITAT IN THE CASE OF SHALEE N KHEMANI [ITA NO. 1945/KOL/2014] ORDER DATED 18.10.2017 HELD AS UNDER VIDE PAGE 24 PARA 9.3: WE THEREFORE HOLD THAT THERE IS ABSOLUTELY NO ADVE RSE MATERIAL TO IMPLICATE THE ASSESSEE TO THE ENTIRE GAMUT OF UNWAR RANTED ALLEGATIONS LEVELED BY THE LD AO AGAINST THE ASSESS EE, WHICH IN OUR CONSIDERED OPINION, HAS NO LEGS TO STAND IN THE EYE S OF LAW. WE FIND THAT THE LD DR COULD NOT CONTROVERT THE ARGUMENTS O F THE LD AR WITH CONTRARY MATERIAL EVIDENCES ON RECORD AND MERE LY RELIED ON THE ORDERS OF THE LD AO. WE FIND THAT THE ALLEGATIO N THAT THE ASSESSEE AND / OR BROKERS GETTING INVOLVED IN PRICE RIGGING OF SOICL SHARES FAILS. IT IS ALSO A MATTER OF RECORD THAT TH E ASSESSEE FURNISHED ALL EVIDENCES IN THE FORM OF BILLS, CONTR ACT NOTES, DEMAT STATEMENTS AND THE BANK ACCOUNTS TO PROVE THE GENUI NENESS OF THE TRANSACTIONS RELATING TO PURCHASE AND SALE OF SHARE S RESULTING IN LTCG. THESE EVIDENCES WERE NEITHER FOUND BY THE LD AO TO BE FALSE OR FABRICATED. THE FACTS OF THE CASE AND THE EVIDEN CES IN SUPPORT OF THE ASSESSEES CASE CLEARLY SUPPORT THE CLAIM OF TH E ASSESSEE THAT THE TRANSACTIONS OF THE ASSESSEE WERE BONAFIDE AND GENUINE AND THEREFORE THE LD AO WAS NOT JUSTIFIED IN REJECTING THE ASSESSEES CLAIM OF EXEMPTION UNDER SECTION 10(38) OF THE ACT. G) THE BENCH H OF MUMBAI ITAT IN THE CASE OF ARVIND KUMAR JAIN HUF [ITA NO.4682/MUM/2014] ORDER DATED 18.09.2017 H ELD AS UNDER VIDE PAGE 6 PARA 8: WE FOUND THAT AS FAR AS INITIATION OF INVESTIGAT ION OF BROKER IS CONCERNED, THE ASSESSEE IS NO WAY CONCERNED WITH TH E ACTIVITY OF THE BROKER. DETAILED FINDING HAS BEEN RECORDED BY C IT (A) TO THE EFFECT THAT ASSESSEE HAS MADE INVESTMENT IN SHARES WHICH WAS PURCHASED ON THE FLOOR OF STOCK EXCHANGE AND NOT FR OM M/S BASANT PERIWAL AND CO. AGAINST PURCHASES PAYMENT HAS BEEN MADE BY ACCOUNT PAYEE CHEQUE, DELIVERY OF SHARES WERE TAKEN , CONTRACT OF SALE WAS ALSO COMPLETE AS PER THE CONTRACT ACT, THE REFORE, THE ASSESSEE IS NOT CONCERNED WITH ANY WAY OF THE BROKE R. NOWHERE THE AO HAS ALLEGED THAT THE TRANSACTION BY THE ASSESSEE WITH THESE PARTICULAR BROKER OR SHARE WAS BOGUS, MERELY BECAUS E THE INVESTIGATION WAS DONE BY SEBI AGAINST BROKER OR HI S ACTIVITY, ASSESSEE CANNOT BE SAID TO HAVE ENTERED INTO INGENU INE TRANSACTION, INSOFAR AS ASSESSEE IS NOT CONCERNED W ITH THE ACTIVITY ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 63 OF THE BROKER AND HAVE NO CONTROL OVER THE SAME. WE FOUND THAT M/S BASANT PERIWAL AND CO. NEVER STATED ANY OF THE AUTHORITY THAT TRANSACTIONS IN M/S RAMKRISHNA FINCAP PVT. LTD. ON THE FLOOR OF THE STOCK EXCHANGE ARE INGENUINE OR MERE ACCOMMODATION ENTRIES. THE CIT (A) AFTER RELYING ON THE VARIOUS DECISION OF TH E COORDINATE BENCH, WHEREIN ON SIMILAR FACTS AND CIRCUMSTANCES, ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE, CAME TO THE CONC LUSION THAT TRANSACTION ENTERED BY THE ASSESSEE WAS GENUINE. DE TAILED FINDING RECORDED BY CIT (A) AT PARA 3 TO 5 HAS NOT BEEN CON TROVERTED BY THE DEPARTMENT BY BRINGING ANY POSITIVE MATERIAL ON REC ORD. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE IN THE FINDINGS OF CIT (A). H) THE HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CA SE OF VIVEK MEHTA [ITA NO. 894 OF 2010] ORDER DATED 14.11.2011 VIDE PAGE 2 PARA 3 HELD AS UNDER: ON THE BASIS OF THE DOCUMENTS PRODUCED BY THE ASSE SSEE IN APPEAL, THE COMMISSIONER OF INCOME TAX (APPEAL) REC ORDED A FINDING OF FACT THAT THERE WAS A GENUINE TRANSACTIO N OF PURCHASE OF SHARES BY THE ASSESSEE ON 16.3.2001 AND SALE THE REOF ON 21.3.2002. THE TRANSACTIONS OF SALE AND PURCHASE WE RE AS PER THE VALUATION PREVALENT IN THE STOCKS EXCHANGE. SUCH FI NDING OF FACT HAS BEEN RECORDED ON THE BASIS OF EVIDENCE PRODUCED ON RECORD. THE TRIBUNAL HAS AFFIRMED SUCH FINDING. SUCH FINDIN G OF FACT IS SOUGHT TO BE DISPUTED IN THE PRESENT APPEAL. WE DO NOT FIND THAT THE FINDING OF FACT RECORDED BY THE COMMISSIONER OF INCOME TAX IN APPEAL, GIVES GIVE RISE TO ANY QUESTION(S) OF LA W AS SOUGHT TO BE RAISED IN THE PRESENT APPEAL. HENCE, THE PRESENT APPEAL IS DISMISSED. I) THE HONBLE JURISDICTIONAL CALCUTTA HIGH COURT IN T HE CASE OF CIT VS. BHAGWATI PRASAD AGARWAL IN I.T.A. NO. 22/KOL/2009 D ATED 29.04.2009 AT PARA 2 HELD AS FOLLOWS: THE TRIBUNAL FOUND THAT THE CHAIN OF TRANSACTION E NTERED INTO BY THE ASSESSEE HAVE BEEN PROVED, ACCOUNTED FOR, DOCUM ENTED AND SUPPORTED BY EVIDENCE. THE ASSESSEE PRODUCED BEFORE THE COMMISSIONER OF INCOME TAX(APPEAL) THE CONTRACT NOT ES, DETAILS OF HIS DEMAT ACCOUNT AND, ALSO, PRODUCED DOCUMENTS SHOWING THAT ALL PAYMENTS WERE RECEIVED BY THE ASSESSEE THR OUGH BANK. J) THE HONBLE SUPREME COURT IN THE CASE OF PCIT VS. T EJU ROHITKUMAR KAPADIA ORDER DATED 04.05.2018 UPHELD THE FOLLOWING PROPOSITION OF LAW LAID DOWN BY THE HONBLE GUJARAT HIGH COURT AS UNDE R: IT CAN THUS BE SEEN THAT THE APPELLATE AUTHORITY A S WELL AS THE TRIBUNAL CAME TO CONCURRENT CONCLUSION THAT THE PUR CHASES ALREADY MADE BY THE ASSESSEE FROM RAJ IMPEX WERE DU LY ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 64 SUPPORTED BY BILLS AND PAYMENTS WERE MADE BY ACCOUN T PAYEE CHEQUE. RAJ IMPEX ALSO CONFIRMED THE TRANSACTIONS. THERE WAS NO EVIDENCE TO SHOW THAT THE AMOUNT WAS RECYCLED BACK TO THE ASSESSEE. PARTICULARLY, WHEN IT WAS FOUND THAT THE ASSESSEE THE TRADER HAD ALSO SHOWN SALES OUT OF PURCHASES MADE F ROM RAJ IMPEX WHICH WERE ALSO ACCEPTED BY THE REVENUE, NO Q UESTION OF LAW ARISES. 20. APPLYING THE PROPOSITION OF LAW LAID DOWN IN THE AB OVE JUDGMENTS TO THE FACTS OF THIS CASE WE ARE BOUND TO CONSIDER AND RELY ON THE EVIDENCE PRODUCED BY THE ASSESSEE IN SUPPORT OF ITS CLAIM AN D BASE OUR DECISION ON SUCH EVIDENCE AND NOT ON SUSPICION OR PREPONDERANCE OF PROBABILITIES. NO MATERIAL WAS BROUGHT ON RECORD BY THE AO TO CONTROV ERT THE EVIDENCE FURNISHED BY THE ASSESSEE. UNDER THESE CIRCUMSTANCE S, WE ACCEPT THE EVIDENCE FILED BY THE ASSESSEE AND ALLOW THE CLAIM THAT THE INCOME IN QUESTION IS LONG TERM CAPITAL GAIN FROM SALE OF SHA RES AND HENCE EXEMPT FROM INCOME TAX. 12. CONSISTENT WITH THE VIEW TAKEN THEREIN, AS THE FACT S AND CIRCUMSTANCES OF THIS CASE ARE SAME AS THE FACTS AND CIRCUMSTANCES O F THE CASES OF NAVNEET AGARWAL (SUPRA), WE DELETE THE ADDITION MADE U/S 68 OF THE ACT, ON ACCOUNT OF SALE OF SHARES IN THE CASE OF BOTH THE ASSESSEES. T HE CONSEQUENTIAL ADDITION U/S 69C IS ALSO DELETED. ACCORDINGLY BOTH THE APPEALS O F THE ASSESSEE ARE ALLOWED. 6.10. IT WOULD BE PERTINENT TO ADDRESS THE CASE LAW RELIED UPON BY THE LD DR BEFORE US ON THE DECISION OF HONBLE BOMBAY HIGH CO URT (NAGPUR BENCH) IN THE CASE OF SANJAY BIMALCHAND JAIN VS PR.CIT (NAGPUR) R EPORTED IN (2018) 89 TAXMANN.COM 196 (BOMBAY) DATED 10.4.2017 ON THE IMP UGNED ISSUE. FROM THE FACTS OF SANJAY BIMALCHAND JAIN SUPRA, WE FIND THAT (I) IN THAT CASE, THE BROKER COMPANY THROUGH WHICH THE SHARES WERE SOLD DID NOT RESPOND TO AOS LETTER REGARDING THE NAMES AND ADDRESS AND BANK ACCOUNT OF THE PERSON WHO PURCHASED THE SHARES SOLD BY THE ASSESSEE ; (II) MOREOVER, AT THE TIME OF ACQUISITION OF SHARES OF BOTH THE COMPANIES BY THE ASSESSEE, THE PAYMENTS WERE MADE IN CASH ; (III) THE ADDRESS OF BOTH THE COMPANIES WERE INTERESTINGLY TH E SAME ; (IV) THE AUTHORIZED SIGNATORY OF BOTH THE COMPANIES WERE ALSO THE SAME PERSON ; (V) THE PURCHASE OF SHARES OF BOTH THE COMPANIES WAS DONE BY THAT ASSES SEE THROUGH BROKER, GSSL AND THE ADDRESS OF THE SAID BROKER WAS INCIDENTALLY THE ADDRESS OF THE TWO COMPANIES. BASED ON THESE CRUCIAL FACTS, THE HONBLE BOMBAY HI GH COURT RENDERED THE DECISION IN FAVOUR OF THE REVENUE. NONE OF THESE FACTORS WER E PRESENT IN THE FACTS OF THE ASSESSEE BEFORE US. HENCE IT COULD BE SAFELY CONCLU DED THAT THE DECISION OF HONBLE BOMBAY HIGH COURT SUPRA IS FACTUALLY DISTINGUISHABL E. 6.11. WE FIND THAT THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS MUKESH RATILAL MAROLIA IN ITA NO. 456 OF 2007 DATED 7.9.2011 HAD HELD AS UNDER:- 5. ON FURTHER APPEAL, THE ITAT BY THE IMPUGNED ORDER A LLOWED THE CLAIM OF THE ASSESSEE BY RECORDING THAT THE PURCHASE OF SHARES D URING THE YEAR 1999- 2000 AND 2000-2001 WERE DULY RECORDED IN THE BOOKS MAINT AINED BY THE ASSESSEE. THE ITAT HAS RECODED A FINDING THAT THE SOURCE OF F UNDS FOR ACQUISITION OF THE ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 65 SHARES WAS THE AGRICULTURAL INCOME WHICH WAS DULY O FFERED AND ASSESSED TO TAX IN THOSE ASSESSMENT YEARS. THE ASSESSEE HAS PRODUCE D CERTIFICATES FROM THE AFORESAID FOUR COMPANIES TO THE EFFECT THAT THE SHA RES WERE IN-FACT TRANSFERRED TO THE NAME OF THE ASSESSEE. IN THESE CIRCUMSTANCES , THE DECISION OF THE ITAT IN HOLDING THAT THE ASSESSEE HAD PURCHASED SHARES OUT OF THE FUNDS DULY DISCLOSED BY THE ASSESSEE CANNOT BE FAULTED. 6. SIMILARLY, THE SALE OF THE SAID SHAERS FOR RS 1,41, 08,484/- THROUGH TWO BROKERS NAMELY, M/S RICHMOND SECURITIES PVT LTD AND M/S SCORPIO MANAGEMENT CONSULTANTS PVT LTD CANNOT BE DISPUTED, BECAUSE THE FACT THAT THE ASSESSEE HAS RECEIVED THE SAID AMOUNT IS NOT IN DISPUTE. IT IS NEITHER THE CASE OF THE REVENUE THAT THE SHARES IN QUESTION ARE STILL LYING WITH THE ASSESSE NOR IT IS THE CASE OF THE REVENUE THAT THE AMOUNTS RECEIVED BY THE ASSESSEE ON SALE OF THE SHARES IS MORE THAN WHAT IS DECLARED BY THE ASSESSEE. THOUGH THERE IS SOME DISCREPANCY IN THE STATEMENT OF THE DIRECTO R OF M/S RICHMAND SECURITIES PVT LTD REGARDING THE SALE TRANSACTION, THE TRIBUNAL RELYING ON THE STATEMENT OF THE EMPLOYEE OF M/S RICHMAND SECURITIE S PVT LTD HELD THAT THE SALE TRANSACTION WAS GENUINE. 7. IN THESE CIRCUMSTANCES, THE DECISION OF THE ITAT IN HOLDING THAT THE PURCHASE AND SALE OF SHARES ARE GENUINE AND THEREFO RE, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN HOLDING THAT THE AMOUNT OF RS 1,41,08,484/- REPRESENTED UNEXPLAINED INVESTMENT UNDER SECTION 69 OF THE INCO ME TAX ACT, 1961 CANNOT BE FAULTED. 8. IN THE RESULT, WE SEE NO MERIT IN THIS APPEAL AND T HE SAME IS DISMISSED WITH NO ORDER AS TO COSTS. 6.12. IN VIEW OF THE AFORESAID FINDINGS IN THE FACT S AND CIRCUMSTANCES OF THE CASE AND RESPECTFULLY FOLLOWING THE VARIOUS JUDICIAL PRE CEDENTS RELIED UPON HEREINABOVE, WE HOLD THAT THE LD CITA WAS NOT JUSTI FIED IN UPHOLDING THE ACTION OF THE LD AO IN BRINGING THE SALE PROCEEDS OF SHARES O F GIFL IN THE SUM OF RS 7,88,77,854/- AS UNEXPLAINED INCOME OF THE ASSESSEE TREATING THE SAME AS JUST AN ACCOMMODATION ENTRY. CONSEQUENTIALLY, THE ADDITION MADE TOWARDS COMMISSION ON SUCH ACCOMMODATION ENTRY AT THE RATE OF 5% IN TH E SUM OF RS 39,43,898/- IS ALSO HEREBY DIRECTED TO BE DELETED. ACCORDINGLY, TH E GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. (D) IN THE CASE OF DIPESH RAMESH VARDHAN VS. DCIT IT A NO.7648/M/2019 A.Y. 2014-15 & ORS. ORDER DATED 11.0 8.2020 THE CO-ORDINATE BENCH HAS DELETED THE ADDITION AS M ADE BY THE AO BY REJECTING THE CLAIM OF THE ASSESSEE UNDER SEC TION 10(38) BY OBSERVING AND HOLDING AS UNDER: 6. WE HAVE CAREFULLY HEARD THE RIVAL SUBMISSIONS A ND PERUSED RELEVANT MATERIAL ON RECORD. SO FAR AS THE FACTUAL MATRIX IS CONCERNE D, THERE IS NO SUBSTANTIAL DISPUTE ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 66 REGARDING THE SAME. THE PERUSAL OF RECORD WOULD REV EAL THAT THE ASSESSEE PURCHASED CERTAIN SHARES OF AN ENTITY NAMELY M/S ST L AS EARLY AS SEPTEMBER, 2011. THE SHARES WERE CONVERTED INTO DEMAT FORM IN ASSESSEES ACCOUNT DURING THE MONTH OF MARCH, 2012. THE TRANSACTIONS TOOK PLA CE THROUGH BANKING CHANNELS. THE INVESTMENTS WERE DULY REFLECTED BY THE ASSESSEE IN FINANCIAL STATEMENTS OF RESPECTIVE YEARS. THE COPIES OF FINANCIAL STATEMENT S OF M/S STL FOR FYS 2009-10 & 2010-11 WHICH LED TO INVESTMENT BY THE ASSESSEE IN THAT ENTITY WAS ALSO FURNISHED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. SUBSEQ UENTLY, M/S STL GOT MERGED WITH ANOTHER ENTITY VIZ. M/S SAL PURSUANT TO SCHEME OF AMALGAMATION U/S 391 TO 394 OF THE COMPANIES ACT, 1956. THE SCHEME WAS DULY APPROVED BY HONBLE BOMBAY HIGH COURT VIDE ORDER DATED 22/03/2013, A CO PY OF WHICH IS ON RECORD. CONSEQUENTLY, THE SHARES OF M/S STL HELD BY THE ASS ESSEE GOT SWAPPED WITH THE SHARES OF M/S SAL AND NEW SHARES WERE ALLOTTED TO T HE ASSESSEE DURING JUNE, 2013 PURSUANT TO THE APPROVED SCHEME OF AMALGAMATION. M/ S SAL IS STATED TO BE LISTED PUBLIC COMPANY GROUP A SHARES SIGNIFYING HIGH TRA DES WITH HIGH LIQUIDITY. THE ASSESSEE HAS SOLD THESE SHARES THROUGH ITS STOCK BR OKER NAMELY M/S UNIQUE STOCKBRO PRIVATE LIMITED IN ONLINE PLATFORM OF THE RECOGNISED STOCK EXCHANGE DURING THE MONTH OF MARCH, 2014. THE SELLING PRICE WAS IN THE RANGE OF RS.489/- TO RS.491/- PER SHARE. THE TRANSACTIONS TOOK PLACE THROUGH ONLINE MECHANISM AFTER COMPLYING WITH ALL T HE FORMALITIES AND PROCEDURE INCLUDING PAYMENT OF STT. THE DELIVERY OF THE SHARE S WAS THROUGH CLEARING MECHANISM OF THE STOCK EXCHANGE AND SALE CONSIDERAT ION WAS RECEIVED THROUGH BANKING CHANNELS. THE TRANSACTIONS ARE DULY EVIDENC ED BY CONTRACT NOTES, DEMAT STATEMENTS, BANK STATEMENTS AND OTHER DOCUMENTARY E VIDENCES. THE KEY PERSON OF ASSESSEE GROUP, IN HIS STATEMENT, MAINTAINED THE POSITION THAT TRADING TRANSACTIONS WERE GENUINE TRANSACTIONS CARRIED OUT THROUGH STOCK EXCHANGE FOLLOWING ALL PROCESS AND LEGAL PROCEDURES. THE ASS ESSEE ALSO FILED TRADING VOLUME DATA AND PRICE RANGE OF THE SCRIP FOR A PERIOD OF M ORE THAN 2 YEARS I.E. FROM JAN, 2013 TO JULY, 2015. THE SHARES REFLECTED HEALTHY TR ADING VOLUME AND THE PRICE RANGE REFLECTED THEREIN WAS IN THE RANGE OF RS.360/ - TO RS.600/- PER SHARE. THE PRICE RANGE WAS STATED TO BE IN THE SAME RANGE FOR 15 MONTHS AFTER THE PERIOD OF SALE OF SHARES BY THE ASSESSEE, WHICH HAS NOT BEEN DISPUTED BY THE REVENUE. ON THE BASIS OF ALL THESE FACTS, IT COULD BE GATHERED THAT THE ASSESSEE HAD DULY DISCHARGED THE ONUS CASTED UPON HIM TO PROVE THE GE NUINENESS OF THE STATED TRANSACTIONS AND THE ONUS HAD SHIFTED ON REVENUE TO REBUT THE SAME. 7. AS AGAINST THE ASSESSEES POSITION, THE PRIMARY MATERIAL TO MA KE ADDITIONS IN THE HANDS OF ASSESSEE IS THE STATEMENT OF SHRI VIPUL BHAT AND TH E OUTCOME OF SEARCH PROCEEDINGS ON HIS ASSOCIATED ENTITIES INCLUDING M/ S SAL. HOWEVER, THERE IS NOTHING ON RECORD TO ESTABLISH VITAL LINK BETWEEN T HE ASSESSEE GROUP AND SHRI VIPUL BHAT OR ANY OF HIS GROUP ENTITIES. THE ASSESS EE, ALL ALONG, DENIED HAVING KNOWN SHRI VIPUL BHAT OR ANY OF HIS GROUP ENTITIES. HOWEVER, NOTHING HAS BEEN BROUGHT ON RECORD TO CONTROVERT THE SAME AND ESTABL ISH THE LINK BETWEEN SHRI VIPUL BHAT AND THE ASSESSEE. THE OPPORTUNITY TO CRO SS-EXAMINE SHRI VIPUL BHAT WAS NEVER PROVIDED TO THE ASSESSEE WHICH IS CONTRAR Y TO THE DECISION OF HONBLE SUPREME COURT IN M/S ANDAMAN TIMBER INDUSTRIES V/S CCE (CA NO.4228 OF 2006) WHEREIN IT WAS HELD THAT NOT ALLOWING THE ASSESSEE TO CROSS-EXAMINE THE WITNESSES BY THE ADJUDICATING AUTHORITY THOUGH THE STATEMENT OF THOSE WITNESSES WERE MADE THE BASIS OF THE IMPUGNED ORDER IS A SERIOUS F LAW WHICH MAKES THE ORDER NULLITY IN AS MUCH AS IT AMOUNTS TO VIOLATION OF PR INCIPAL OF NATURAL JUSTICE BECAUSE ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 67 OF WHICH THE ASSESSEE WAS ADVERSELY AFFECTED. THE W HOLE BASIS OF MAKING THE ADDITION IS THIRD PARTY STATEMENT WITHOUT THERE BEI NG ANY TANGIBLE MATERIAL. IT IS TRITE LAW THAT ADDITIONS MERELY ON THE BASIS OF SUS PICIOUS, CONJECTURES OR SURMISES COULD NOT BE SUSTAINED IN THE EYES OF LAW AS HELD B Y HONBLE SUPREME COURT IN OMAR SALAY MOHAMED SAIT V/S CIT (1959 37 ITR 151). THE SUSPICION HOWEVER STRONG COULD NOT PARTAKE THE CHARACTER OF LEGAL EVI DENCE AS HELD BY HONBLE SUPREME COURT IN UMACHARAN SHAW & BROS. V/S CIT (19 59 37 ITR 271). THEREFORE, WE FIND THAT ONUS AS CASTER UPON REVENUE TO CORROBO RATE THE IMPUGNED ADDITIONS BY CONTROVERTING THE DOCUMENTARY EVIDENCES FURNISHE D BY THE ASSESSEE AND BY BRINGING ON RECORD, ANY COGENT MATERIAL TO SUSTAIN THOSE ADDITIONS, COULD NOT BE DISCHARGED BY THE REVENUE. THE ALLEGATION OF PRICE RIGGING / MANIPULATION HAS BEEN LEVIED WITHOUT ESTABLISHING THE VITAL LINK BETWEEN THE ASSESSEE AND VARIOUS ENTITIES OF SHRI VIPUL BHAT. WE FIND THAT THE WHOLE BASIS OF MAKING ADDITIONS IS THIRD PARTY STATEMENT AND NO OPPORTUNITY OF CROSS-E XAMINATION HAS BEEN PROVIDED TO THE ASSESSEE TO CONFRONT THE SAID PARTY. AS AGAI NST THIS, THE ASSESSEES POSITION THAT THAT THE TRANSACTIONS WERE GENUINE AND DULY SU PPORTED BY VARIOUS DOCUMENTARY EVIDENCES, COULD NOT BE DISTURBED BY TH E REVENUE. 8. THE ALLEGATIONS OF LD.AO THAT THE ASSESSEE WAS PART OF THE GROUP WH ICH INDULGED IN RIGGING OR MANIPULATION OF PRICES OF SHARES IN CONNIVANCE WITH SHRI VIPUL BHAT IS NOT BACKED BY ANY INDEPENDENT MATERIAL. FIRSTLY, THERE IS NOTH ING ON RECORD WHICH ESTABLISHES THE FACT THAT THE ASSESSEE WAS ACQUAINTED WITH SHRI VIPUL BHAT OR ANY OF HIS ENTITIES AND SECONDLY, THE ONUS CASTED UPON ASSESSE E TO PROVE THE GENUINENESS OF THE TRANSACTIONS WAS ALREADY DISCHARGED BY THE ASSE SSEE. SHRI VIPUL BHAT, IN HIS STATEMENT, STATED THAT ONE SHRI SANDEEP MAROO ACTED AS INTERMEDIARY WHO INTRODUCED VARDHAN FAMILY TO HIM. HOWEVER, NO FURTH ER INVESTIGATIONS HAVE BEEN CARRIED OUT TO ESTABLISH THIS VITAL LINK BETWEEN TH E ASSESSEE AND SHRI VIPUL BHAT. WE DO NOT FIND ANY INDEPENDENT INVESTIGATIONS BY LD . AO TO BRING ON RECORD ANY TANGIBLE MATERIAL TO CORROBORATE THE SAME. THERE AR E NO EVIDENT OR EVEN ALLEGATION OF ANY CASH EXCHANGE BETWEEN THE ASSESSE E AND GROUP ENTITIES OF SHRI VIPUL BHAT. THIS IS FURTHER EVIDENCED BY THE FACT T HAT NO SUBSTANTIAL INCRIMINATING MATERIAL / WEALTH OF THAT MAGNITUDE HAS BEEN FOUND DURING THE COURSE OF SEARCH OPERATIONS ON ASSESSEE WHICH WOULD CORROBORATE SUCH PRESUMPTION AND PROVE THAT THE TRANSACTIONS WERE SHAM TRANSACTIONS, IN AN Y MANNER. 9. THE FACT THAT THE ASSESSEE COULD NOT PRODUCE THE CONCERNED PERSON OF M/S SAL WAS RIGHTLY CONTROVERTED BY SUBMITTING THAT THE AFORESAID ENTIT Y WAS NOT UNDER THE CONTROL OF THE ASSESSEE AND THE ASSESSEE WAS UNDER NO OBLIGATI ON TO DO SO. THE EXISTENCE OF M/S SAL IS BEYOND DOUBT SINCE IT WAS A LISTED CORPO RATE ENTITY AND SECONDLY, IT WAS SUBJECT MATTER OF SCHEME OF AMALGAMATION U/S 391 TO 394. THE SCHEME OF AMALGAMATION WAS DULY BEEN APPROVED BY HONBLE BOMB AY HIGH COURT. THEREFORE, THE EXISTENCE OF THE SAID ENTITY COULD N OT BE DOUBTED, IN ANY MANNER. 10. THE ABOVE CONCLUSION IS FURTHER FORTIFIED BY TH E FACT THAT IN SHARE SALE TRANSACTIONS THROUGH ONLINE MODE, THE IDENTITY OF T HE BUYER OF THE SHARES WOULD NOT BE KNOWN TO THE ASSESSEE. THEREFORE, THE ADVERS E CONCLUSION DRAWN BY LD. AO MERELY ON THE BASIS OF THE FACT THAT THE BUYER OF T HE SHARES WERE GROUP ENTITIES OF SHRI VIPUL BHAT, COULD NOT BE SUSTAINED. THE FACT T HAT THERE WERE INDEPENDENT BUYERS ALSO WOULD REBUT THE SAME AND WEAKEN THE CON CLUSION DRAWN BY LD. AO. 11. THE LD. AR HAS RELIED ON PLETHORA OF JUDICIAL P RONOUNCEMENTS IN SUPPORT OF VARIOUS SUBMISSIONS, WHICH WE HAVE DULY CONSIDERED. THESE DECISIONS WOULD ONLY SUPPORT THE CONCLUSIONS DRAWN BY US THAT ONCE THE A SSESSEE HAS DISCHARGED THE ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 68 ONUS OF PROVING THE GENUINENESS OF THE TRANSACTIONS , THE ONUS WOULD SHIFT ON THE REVENUE TO DISLODGE ASSESSEES CLAIM AND BRING ON R ECORD CONTRARY EVIDENCES TO REBUT THE SAME. UNTIL AND UNLESS THIS EXERCISE IS C ARRIED OUT, THE ADDITIONS COULD NOT BE SUSTAINED IN THE EYES OF LAW. 12. TO ENUMERA TE THE FEW, THE HONBLE BOMBAY HIGH COURT IN CIT V/S SHYAM S.PAWAR (54 TAXM ANN.COM 108 10/12/2014) DECLINED TO ADMIT REVENUES APPEAL SINCE THE REVENU E FAILED TO CARRY FORWARD THE INQUIRY TO DISCHARGE THIS BASIC ONUS. THE CO-ORDINA TE BENCH OF THIS TRIBUNAL IN MUKESH R.MAROLIA V/S ADDL. CIT (6 SOT 247 15/12/200 5) HELD THAT PERSONAL KNOWLEDGE AND EXCITEMENT ON EVENTS SHOULD NOT LEAD THE ASSESSING OFFICER TO A STATE OF AFFAIRS WHERE SALIENT EVIDENCES ARE OVERLO OKED. WHEN EVERY TRANSACTION HAS BEEN ACCOUNTED, DOCUMENTED AND SUPPORTED, IT WO ULD BE VERY DIFFICULT TO BRUSH ASIDE THE CONTENTIONS OF THE ASSESSEE THAT HE HAD PURCHASED SHARES AND HAD SOLD SHARES AND ULTIMATELY PURCHASED A FLAT UTI LIZING THE SALE PROCEEDS OF THOSE SHARES AND THEREFORE, THE CO-ORDINATE BENCH CHOSE T O DELETE THE IMPUGNED ADDITIONS. WE FIND THAT THIS DECISION WAS FIRSTLY B EEN APPROVED BY HONBLE BOMBAY HIGH COURT VIDE ITA NO. 456 OF 2007 ON 07/09 /2011 AND THEREAFTER, SPECIAL LEAVE PETITION AGAINST THE SAID DECISION HA S BEEN DISMISSED BY HONBLE SUPREME COURT VIDE SLP NO. 20146 OF 2012 DATED 27/0 1/2014 WHICH IS REPORTED AS 88 CCH 0027 SCC. THE SMC BENCH OF TRIBUNAL IN AN RAJ HIRALAL SHAH (HUF) V/S ITO (ITA NO. 4514/MUM/2018 DATED 16/07/2019) HELD T HAT IN THE ABSENCE OF ANY EVIDENCE TO IMPLICATE THE ASSESSEE OR TO PROVE THAT THE TRANSACTIONS WERE BOGUS, THE LONG-TERM CAPITAL GAINS DECLARED BY THE ASSESSE E COULD NOT BE DOUBTED WITH. THIS CASE WAS DEALING WITH GAINS EARNED BY THE ASSE SSEE ON SALE OF SAME SCRIP I.E. M/S SUNRISE ASIAN LTD. 13. THEREFORE, CONSIDERING T HE ENTIRETY OF FACTS AND CIRCUMSTANCES, WE ARE NOT INCLINED TO ACCEPT THE ST AND OF LD.CIT(A) IN SUSTAINING THE IMPUGNED ADDITIONS IN THE HANDS OF THE ASSESSEE . RESULTANTLY, THE ADDITION ON ACCOUNT OF ALLEGED LONG-TERM CAPITAL GAINS AS WELL AS ESTIMATED COMMISSION AGAINST THE SAME, STANDS DELETED. THE GROUNDS OF AP PEAL, TO THAT EXTENT, STAND ALLOWED. 14. THE GROUNDS RELATING TO LEVY OF INTERE ST AS WELL AS INITIATION OF PENALTY, BEING CONSEQUENTIAL IN NATURE, WOULD NOT R EQUIRE ANY SPECIFIC ADJUDICATION ON OUR PART. FINALLY, THE APPEAL STAND S PARTLY ALLOWED IN TERMS OF OUR ABOVE ORDER. (E) SIMILARLY, IN THE CASE OF CIT V/S SHYAM S. PAWAR (54 TAXMANN.COM 108 10/12/2014) THE HONBLE JURISDICTIO NAL HIGH COURT HAS UPHELD THE ORDER OF TRIBUNAL WHEREIN THE TRIBUNAL HAS DELETED THE ADDITION BY OBSERVING THAT D-MAT ACCOUNT AND CONTRACT NOTE SHOWED THE CREDIT/DETAILS OF SHARE TRANSACTIONS AND THAT THE REVENUE HAD STOPPED ENQUI RY AT PARTICULAR POINT AND DID NOT CARRY FORWARD IT TO DI SCHARGE ITS ONUS. IN THIS CASE ALSO THE ASSESSEE HAS DECLARED THE CAPITAL GAIN ON SALE OF SHARES OF TWO COMPANIES WHICH WERE DONE ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 69 THROUGH THE BROKERS AT KOLKATA AND PERFORMANCE OF T HE CONCERNED COMPANY WAS NOT SUCH AS WOULD JUSTIFY THE INCREASE IN SHARE PRICES AND THEREFORE THE AO HELD THE TRANS ACTION AS BOGUS AND HAVING BEEN DONE TO CONVERT UNACCOUNTED M ONEY INTO ACCOUNTED ONE AND THUS MADE THE ADDITION UNDER SECTION 68 THE HONBLE HIGH COURT DISMISSED THE APPEAL OF T HE REVENUE ON THE GROUND THAT NO SUBSIDIARY QUESTION OF LAW AR ISES. SIMILAR RATIO HAS BEEN LAID DOWN BY HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. MUKESH RATILAL MAROLIA ITA NO.456 OF 2007 AND CIT VS. JAMNADEVI AGARWAL THE RATIO H AS BEEN LAID DOWN BY THE HONBLE BOMBAY (2012) 20 TAXMAN.CO M 529 (BOMBAY). WE ALSO NOTE THAT THE DECISION RELIED UP ON BY THE AO IN THE CASE OF HERSH WIN CHADHA VS. DCIT (DELHI- ITAT) WHICH WAS RENDERED IN THE CONTEXT OF BOFORS DEAL WH EREIN THE SEVERAL CENTRAL AGENCIES SUCH AS CBI, IB, RAW ETC. WERE INVOLVED WHICH PRODUCED AUTHORITY OF EVIDENCES. HOW EVER, IN THE PRESENT CASE THE AO HAS ACTED MERELY ON THE BAS IS OF SURMISES AND CONJUNCTURES WITHOUT BRINGING ANY CORR OBORATIVE CLINCHING EVIDENCES TO THE EFFECT THAT LONG TERM CA PITAL GAIN MADE BY THE ASSESSEE IS BOGUS. (F) SIMILARLY, IN THE CASE OF SUMATI DAYAL IS ON TH E HUMAN PROBABILITIES AND DEALS WITH THE SOURCE OF INCOME W ITH REGARD TO HORSE RACING ACTIVITY AND RELATES BACK TO AS EARLY AS 40 YEARS BACK FOR A.Y. 1772-73 WHEN ELECTRONIC SYSTEM WAS NO T AVAILABLE AND THUS THE CONCEPT OF HUMAN PROBABILITY WAS RELIE D BUT IN THE PRESENT CASE EVERYTHING IS GOVERNED AND MANAGED ELECTRONICALLY LEAVING A LITTLE SCOPE FOR MANIPULAT ION. ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 70 (G) IN THE CASE OF DURGAPRASAD MORE THE ISSUE PERTA INS TO CONVEYANCE OF DOCUMENTS, HOUSE PROPERTY INCOME AND THEREFORE NOT APPLICABLE. (H) SIMILARLY, THE DECISION OF CIT VS. P. MOHANKALA IS IN THE CONTEXT OF SCOPE AND APPLICABILITY OF SECTION 68. THE MUMBAI CO-ORDINATE BENCH IN THE CASE OF KUNAL DEDHIA (SUPR A) IN PARA 22 HAS CATEGORICALLY REPORTED A FINDING THAT SECTIO N 68 CAN NOT BE INVOKED TO DENY THE CLAIM OF EXAMINATION UNDER S ECTION 10(38) OF THE ACT. THE FACTS AND MERITS IN THE CAS E OF DISHA CHANDRANI SHAH ITA NO.6858/M/2011 ARE COMPLETELY DISTINGUISHABLE. IN THAT CASE THE ASSESSEE COULD N OT PRODUCE CERTIFICATE AND SHARE TRANSFER ETC. AND THUS THE TR ANSACTION OF SHARE COULD NOT BE VERIFIED AND THE PENNY STOCK COM PANY INVOLVED A PRIME CAPITAL GAIN LIMIT WAS DECLARED AS PENNY STOCK BY SEBI AND THE BROKER INVOLVED MR. SANJAY KABRA WH O WAS ALSO INDICTED FOR MANIPULATING THE SHARE PRICES WHI CH IS NOT THE PRESENT CASE. (J) SIMILARLY, IN THE CASE OF ARUN M KARIA VS. ACIT 707/M/2010 THE MATTER WAS SET ASIDE FOR A FRESH ADJ UDICATION AND THERE IS NO CONCLUSIVE FINDING BY THE HONBLE C OURT AND THEREFORE NOT RELEVANT. (K) THE CASE OF SANJAY VIMAL CHAND JAIN OF JURISDICT IONAL HIGH COURT IS ALSO DISTINGUISHABLE ON FACTS AS THE BROKER COMPANY THROUGH WHICH THE SHARES WERE SOLD DID NOT RESPOND TO AOS LETTER AND THE SAID DECISION OF THE HONBLE BOMBAY HIGH COURT HAS BEEN DISTINGUISHED BY THE CO-ORDINATE BEN CH IN THE ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 71 CASE OF VIJAYRATTAN BALKRISHAN MITTAL (SUPRA) IN PAR A 30 PAGE 67. ( L ) SIMILARLY, LIKEWISE THE CASE OF DISHA LALWANI VS. ITO IN ITA NO.6398/M/2012 IS IN A DIFFERENT CONTEST OF SUB SCRIPTION OF SHARE APPLICATION MONEY AND IS NOT RELEVANT TO THE PRESENT CASE. 10. WE FIND THAT LD. A.R. HAS ALSO DISTINGUISHED TH E DECISIONS RELIED UPON BY THE LD. CIT(A) AS DISCUSSED HEREINAB OVE AND THE SAME ARE NOT APPLICABLE. 11. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE IN THE LIGHT OF VARIOUS DECISIONS OF THE CO-ORDINATE B ENCHES AND HONBLE JURISDICTIONAL HIGH COURT WE ARE NOT IN AGR EEMENT WITH THE CONCLUSION DRAWN BY THE LD. CIT(A) THAT THE LON G TERM CAPITAL GAIN MADE BY THE ASSESSEE FROM SALE OF SHAR ES IS A NON GENUINE TRANSACTION AND ACCORDINGLY WE SET ASIDE TH E ORDER OF LD. CIT(A) AND DIRECT THE AO TO DELETE THE ADDITION MADE UNDER SECTION 68 OF THE ACT AND DIRECT THE AO TO GRANT EX EMPTION UNDER SECTION 10(38) OF THE ACT IN RESPECT OF LONG TERM CAPITAL GAIN. 12. SINCE WE HAVE ALLOWED THE APPEAL OF THE ASSESSE E ON MERIT, THE ISSUE RAISED IN GROUND NO.1 & 2 WHICH ARE OF LE GAL NATURE ARE NOT BEING ADJUDICATED. 13. THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 14. THE ISSUE RAISED IN THE OTHER APPEALS OF THE FA MILY MEMBERS IS IDENTICAL TO ONE AS DECIDED BY US IN ITA ITA NOS.2785 TO 2788/MUM/2019 & ORS. SHRI VINOD L. GADHIYA & ORS. 72 NO.2787/M/2019 A.Y. 2014-15 (SUPRA) WITH THE DIFFER ENCE THAT THE SHARES PURCHASED BY THE FAMILY MEMBERS ARE OF D IFFERENT COMPANIES AND BARRING THAT ALL OTHER FACTS ARE IDEN TICAL. WE, THEREFORE, HOLD THAT OUR FINDING IN ITA NO.2787/M/2 019 A.Y. 2014-15 WOULD MUTATIS MUTANDIS APPLY TO THESE APPEA LS AS WELL. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD. C IT(A) AND DIRECT THE AO TO DELETE THE ADDITION MADE UNDER SEC TION 68 OF THE ACT AND ALLOW EXEMPTION UNDER SECTION 10(38) OF THE ACT IN RESPECT OF LONG TERM CAPITAL GAIN. 15. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS: 29/01/2 021 SD/- (AMARJIT SINGH) SD/- (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 29/01/2021 COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//